One of the most impactful provisions of the SECURE Act 2.0 is the requirement that catch-up contributions for certain employees be made on a Roth basis. Beginning in 2026, participants age 50 and older who earned more than $150,000 (indexed) in wages from their existing employer during the prior year must have their catch-up contributions made as after-tax Roth contributions. Pre-tax catch-up contributions will no longer be permitted for this group.
Why This Matters for Plan Sponsors
This change carries important operational and communication implications for plan sponsors:
- Payroll System Readiness
Payroll providers will need to correctly identify participants who meet the compensation threshold and automatically route their catch-up contributions into the Roth source. Sponsors should engage their payroll teams and recordkeepers now to confirm that systems will be ready to handle the change. - Operational Coordination
Plan operations will require close alignment between payroll, HR, and the recordkeeper. Issues such as compensation tracking, coding contributions correctly, and updating file feeds all need to be tested before the effective date. A misstep could result in compliance errors or missed contributions. Sponsors will want to be sure they not only have a Roth contribution option, but also an in-plan Roth conversion feature to allow for any contribution errors. - Participant Communication
Affected employees will need advance notice. For many, this will be their first experience with Roth contributions, and they may have questions about tax treatment and how this impacts their retirement planning. Clear communication will be key to avoiding confusion during enrollment and deferral elections.
Next Steps for Sponsors
- Review payroll provider readiness and request a timeline for implementation.
- Update plan procedures to ensure catch-up contributions are monitored and coded correctly.
- Assure plan documents are updated to allow for Roth contributions and in-plan Roth conversions.
- Draft participant communications explaining the change, ideally in partnership with your advisor.
The SECURE Act 2.0 Roth catch-up requirement underscores the growing importance of payroll-plan coordination. By preparing early, sponsors can ensure a smooth transition and demonstrate strong fiduciary oversight.
Have additional questions? Contact our team at Twelve Points Retirement Advisors today!
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