Is Your Business Prepared? What the 2026 Roth Catch-Up Mandate Means for You

If you have employees earning over $150,000, a significant change to your company’s retirement plan is coming in 2026. Under the SECURE 2.0 Act, high earners will be required to make catch-up contributions to Roth 401(k) accounts rather than traditional pre-tax accounts.^[1,3] While this may sound like a minor technical adjustment, it could have substantial implications for your organization.

A New Era for Retirement Savings

Starting January 1, 2026, employees with wages exceeding $150,000 in the prior year must make all catch-up contributions on a Roth basis.^[1,2] This means these contributions will be made with after-tax dollars rather than the pre-tax contributions many of your executives and employees have relied on for decades. The IRS finalized these regulations in 2024, giving employers just more than a year to prepare. ^[1]

The $150,000 high-earner threshold will be adjusted for inflation going forward, but make no mistake, this could affect a significant portion of your team.^[3]

What This Means for Your Business

This change creates three immediate challenges:

Employee tax planning gets more complicated. Your high earners have relied on catch-up contributions to reduce their current taxable income. Under the new rules, they’ll pay taxes on these contributions now rather than later.^[2] While Roth accounts offer tax-free growth and withdrawals in retirement, the short-term impact requires proactive communication and planning support.^[4]

This shift could surprise your employees. Many prefer the immediate tax deduction for traditional 401(k) contributions, especially those planning to be in lower tax brackets in retirement.^[4] How well you communicate this change could impact employee satisfaction.

Your plan design requires a decision. If your plan doesn’t currently offer Roth options, employees earning over $150,000 will lose catch-up eligibility entirely starting January 1, 2026.^[1,3] You must either add Roth options or accept this outcome. Either way, plan amendments, payroll updates, and employee communications need to be coordinated now.^[2,5]

Action Plan for 2026

Now is the time to act. Here are four steps to get started:

1. Audit your plan. Figure out how many employees will be affected and what payroll system changes you’ll need to identify high earners and redirect their catch-up contributions properly. If your plan doesn’t currently offer Roth options, you’ll need to amend it immediately to avoid eliminating catch-up eligibility for your highest earners.^[2,3]
2. Communicate often and clearly. Provide your employees with straightforward information about how this change affects their personal finances. Consider bringing in financial advisors to host education sessions throughout 2026.^[4]
3. Check your competitive position. Take a fresh look at whether your overall benefits package still appeals to executives, given this mandate. This might be a good opportunity to strengthen other parts of your retirement offering.^[5]
4. Get expert help. At Bryn Mawr Trust, we help business owners navigate complex retirement planning challenges with solutions tailored to your specific goals.^[6] We focus on both compliance and strategic advantage—making sure your plan works as hard for your people as they work for your business.

The 2026 Roth catch-up mandate represents one of the most significant changes to retirement planning for high earners in recent history.^[1,4] The formal plan document amendment deadline is December 31, 2026.^[1] The IRS has provided a “reasonable, good faith interpretation” standard through the end of 2026 to offer flexibility during implementation, but this grace period is meant to support your transition, not delay it.^[1] The question is not whether your organization will comply; it is whether you will turn compliance into a competitive advantage. Take the first step toward your goals. Contact us today.

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References

1. Internal Revenue Service. (2024). Treasury, IRS issue final regulations on new Roth catch-up rule, other SECURE 2.0 Act provisions. Retrieved from https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-on-new-roth-catch-up-rule-other-secure-2-0-act-provisions
2. NFP. (2024). Roth catch-up mandate compliance: Affirmative elections. Retrieved from https://www.nfp.com/retirement/insights/roth-catch-up-mandate-compliance
3. Groom Law Group. (2024). SECURE 2.0 developments and guidance for 2024. Retrieved from https://www.groom.com/resources/secure-2-0-developments-and-guidance-for-2024/
4. Financial Planning Association. (2024). Reexamining the SECURE 2.0 Act for 2024: Previous, current, and future considerations. Retrieved from https://www.financialplanningassociation.org/article/journal/JAN24-reexamining-secure-20-act-2024
5. Journal of Accountancy. (2024). The SECURE 2.0 Act and its impact on the retirement plan landscape. Retrieved from https://www.journalofaccountancy.com/issues/2024/jan/secure-act-impact-retirement-plan-landscape.html
6. Bryn Mawr Trust. Corporate retirement planning services. Retrieved from https://www.bmt.com/services/corporate-retirement-plans/