IRS Announces New Effective Date for 401(k) Catch-Up Changes from SECURE 2.0 Act

On September 16, 2025, the IRS issued final regulations to a delayed provision that was initially enacted under the SECURE 2.0 Act back in 2023.  This provision modifies the treatment of certain 401(k) catch-up contributions for high-income employees.

When SECURE 2.0 first passed, the rule was set to take effect in January 2024. However, after significant pushback from plan recordkeepers citing administrative challenges, the IRS delayed implementation by two years. As a result, the rule will now go into effect for plan years beginning in 2026.

Details of final guidance

The SECURE 2.0 Act provision requires high-paid employees who wish to make catch-up contributions to have them made on a Roth basis.  A high-paid employee is defined as someone who earned more than $145,000 (indexed to inflation), in W-2 wages from their employer in the prior year.  The new final guidance applies to 401(k), 403(b) and governmental 457(b) plans [note that it does not apply to SIMPLE or non-governmental 457(b) plans].  It also applies to both the regular catch-up contributions for those who turn age 50 or over ($7,500 for 2025) and the new “super catch-up” for employees who turn ages 60, 61, 62 or 63 during the year ($11,250 for 2025).

Plan administrator feedback incorporated into final rules

The IRS did take into consideration some of the issues that plan administrators had pointed out, but in the end, they held firm on their original intent.  For example, a plan that does not offer Roth contributions would be prohibited from allowing high-paid employees to make any catch-up contributions for that year (pre-tax or Roth).  Another suggestion was made to ease the administrative burden by requiring catch-up contributions for all employees to be Roth, but the IRS refused to agree with that point.  The IRS did not extend the original rule any longer so plans must implement the new rule effective for plan years beginning in 2026. The IRS did extend the effective date of interpreting their final regulations to the new law until January 1, 2027.

Plan for 2026

With two different dates, what are plans to do?  The answer is that plans subject to this rule are required to adopt the provisions for their 2026 plan year.  That second date indicates the grace period given by the IRS for the first year. There are many other administrative rules addressed in the final regulations; therefore, it is highly recommended that you consult with your plan administrator/recordkeeper to ensure your plan is updated to reflect these new rules. Fill out the form on this page to speak with a leader of our Tax Practice to discuss how the new rule may impact your business.