Effective January 1, 2026, employees with FICA wages that exceed $145,000 in the preceding calendar year will only be able to make age-based catch-up contributions on a Roth basis.
What does this mean for my 401k plan?
If your plan has a Roth source, your plan may provide that participants that exceed $145,000 in wages in the prior year are “deemed” to have designated pretax catch-up contributions as Roth contributions.
If your plan does not have a Roth source, participants who exceed the FICA wage threshold will not be able to make catch-up contributions. Pre-tax deferrals will need to be stopped when the annual limit is reached.
What do I need to do?
- Watch for communications from your recordkeeper. Recordkeepers are providing resources to guide plan sponsors through the changes.
- Notify your participants of the change. Your recordkeeper can provide a notification template.
- Contact your payroll provider to ensure they are ready for the updated regulations.
- Reach out to our team at Arcwood Financial. We can review your plan and provide assistance with any necessary updates.
Resources
Fidelity Roth Catch-Up Resource Center
IRS Issues Roth Catch-Up Final Regulations
