Beginning in 2026, a new rule will change how some employees make catch-up contributions. Workers age 50 or older who earned more than $150,000 in 2025 FICA wages must make their catch-up contribution as Roth, not pre-tax. Regular deferrals do not have to change.

Plan sponsors can choose from several ways to apply the rule. You may ask employees to make a separate Roth election, automatically treat high earners’ catch-up dollars as Roth, or remove catch-up contributions altogether. Each option affects payroll, communication, and plan operations in different ways.

This guide breaks down the rule, the choices you can make, and key points to consider as you prepare your plan for 2026 and beyond.

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Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

This information is provided as a general guide to educate plan sponsors. It is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

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