Rothification of Catch-Up Contributions: What Employers Need to Know

The Rothification of catch-up contributions, part of the SECURE Act 2.0 (Section 603), will take effect on January 1, 2026, and employers should start preparing now.

“Rothification” refers to the requirement that certain catch-up contributions, the additional amounts workers age 50+ can contribute to their retirement plans, must now be made as Roth contributions rather than traditional pre-tax contributions.

This change applies to participants who earned more than $145,000 in FICA wages (Box 3 on their W-2) from their employer in the prior year. In other words:

• Employees under 50 can continue contributing pre-tax or Roth dollars.
• Employees 50 or older who made $145,000+ must make their catch-up contributions as Roth (after-tax) contributions.

Employers will need to review and update their 401(k) plan documents, as well as ensure payroll and recordkeeping systems can accommodate these new requirements.

If your company’s 401(k) plan does not currently offer a Roth option, affected employees won’t be able to make catch-up contributions at all once this rule goes into effect.

Now is the time to:

• Confirm your plan offers a Roth option or begin the process of adding one.
• Coordinate with your plan carrier and payroll provider to ensure systems are ready.
• Communicate with impacted employees so they understand how the change affects their retirement savings strategy.

Our team of Minneapolis and St. Cloud, Minnesota based CPAs help employers navigate complex regulatory changes like this with clarity and confidence.

We work closely with business owners, HR professionals, and plan administrators to:

• Review and interpret plan documents for SECURE 2.0 compliance.
• Collaborate with plan carriers to streamline updates to payroll and contribution systems.
• Educate employees about how Roth contributions differ from pre-tax contributions.
• Identify potential tax implications and planning opportunities for both employers and participants.

Whether you’re a growing business implementing your first 401(k) plan or an established organization updating existing benefits, our team of experts can help ensure your plan remains compliant and strategically aligned with your goals.

Although the Rothification requirement doesn’t take effect until January 1, 2026, proactive preparation will help minimize disruption and ensure a smooth transition. Employers who start now will be in the best position to communicate effectively with employees and maintain compliance.

If you’re unsure how this change impacts your business, Froehling Anderson is here to help you assess your current plan and prepare your payroll and retirement systems for the road ahead.

Disclaimer: The information provided here is accurate at the time of publication but may change as laws and regulations evolve. While Froehling Anderson aims to share accurate, timely information, we encourage you to reach out to your relationship manager for guidance on your specific situation.

Additionally, this content is for informational purposes only and does not constitute legal, tax, or audit advice. Please consult with your CPA for guidance tailored to your situation.