You may have already heard about the upcoming Roth Catch-Up Rule for 401(k) and 403(b) plans, but it’s worth emphasizing just how important it is for employers to prepare now.

Starting January 1, 2026, employees earning more than $145,000 in the prior year will be required to make their catch-up contributions on a Roth (after-tax) basis.

It may seem like a small tweak, but for employers, it introduces key administrative updates to plan documents, payroll systems, and employee communication — and getting ahead of it now will save time (and headaches) later.

What’s Changing

Beginning January 1, 2026, employees aged 50 and older who earned more than $145,000 in wages (indexed annually) in the prior year will be required to make Roth catch-up contributions instead of pre-tax.

In other words, if an employee earned over that threshold and wants to contribute beyond the standard limit ($23,500 for 2025), those extra dollars can’t reduce their taxable income — they’ll go into the Roth side of the plan instead.

This shift is part of the SECURE 2.0 Act’s broader goal to expand Roth savings opportunities and simplify the retirement landscape (though most would agree it’s anything but simple for employers).

Why It Matters

This rule doesn’t just impact employees — it adds several layers of responsibility for employers. Plans need to:

• Confirm that Roth contributions are allowed in the plan document.
• Coordinate payroll systems to identify high earners and properly route catch-ups as Roth.
• Communicate changes clearly to affected employees so they understand why their contributions and take-home pay might look different.

Failing to implement the change properly could lead to plan errors, compliance issues, and a confusing experience for employees — especially those nearing retirement who rely on these contributions.

Tips to Navigate the Rule Smoothly

1. Check your plan document now.
   If your plan doesn’t currently allow Roth contributions, it will need to — otherwise, high-earning employees won’t be able to make catch-ups after 2025.
2. Coordinate with payroll early.
   Make sure your payroll provider can identify employees who earned over $145,000 last year and correctly process their catch-ups as Roth contributions.
3. Communicate proactively.
   No one likes surprises — especially when it comes to paychecks or taxes. Let eligible employees know what’s changing and how it affects their savings options.
4. Review forms and notices.
   Update deferral forms, employee notices, and plan materials to reflect the Roth-only requirement for certain catch-ups.
5. Plan for amendments.
   Expect to amend your plan document before the 2026 effective date. Confirm deadlines and work with your plan administrator to ensure a smooth transition.

How NESA Helps

NESA’s team keeps employers ahead of every regulatory change — so managing a retirement plan never feels overwhelming.

Here’s how we’re supporting clients through the Roth Catch-Up Rule:

• Proactive updates: We notify clients early, breaking down complex regulations into clear next steps.
• Plan review and amendments: Our specialists review plan documents to confirm Roth provisions are in place and prepare required updates.
• Payroll coordination: We guide employers on what payroll systems need to track and how to set up proper Roth processing.
• Employee communication: We provide simple, ready-to-use communication templates to help employers explain the change to their teams.

In short, we handle the heavy lifting so our clients can focus on running their business or nonprofit — without worrying about missing a compliance deadline.

The Bottom Line

The 2026 Roth Catch-Up Rule is approaching fast. While it may look like a small technical change, it carries big administrative implications.

The good news? With a little preparation — and the right support — it’s completely manageable. Review your plan, talk with your payroll provider, and make sure your systems are ready well before January 2026.

Because managing your retirement plan should be simple — even when the rules aren’t.