Prior to SECURE 2.0, participants in 401(k), 403(b) and governmental 457(b) plans had the option to make catch-up contributions on a pre-tax or Roth basis if they were aged 50 or older—and if the plan documents permitted catch-up contributions.
Effective for plan years beginning January 1, 2026, participants whose W-2 FICA* income is $145,000 or greater (indexed for inflation) will no longer have the option to make catch-up contributions on a pre-tax basis. Catch-up contributions for participants with income greater than $145,000 in the preceding calendar year (and from the current employer) can only be made on an after-tax (Roth) basis.
Remember…
Pre-tax: participants elect to defer a portion of their pay into plans before it is taxed—meaning that contributions and earnings grow tax-deferred until these funds are distributed.
Roth basis: participants elect to contribute a portion of their after-taxed pay—meaning that contributions are taxed at the current tax rate, but earnings grow tax-deferred, and distributions are tax free if the account is at least five years old, and the participant is at least 59 ½.
View contribution limits
What about participants who earned less than $145,000 in the prior year?
Catch-up contributions are intended to give older participants the opportunity to defer additional amounts on a tax-favored basis as they get closer to retirement age. Participants that make less than $145,000 in FICA income can still make catch-up contributions on a pre-tax basis, which means that these participants can continue to take advantage of tax-deferred contributions and earnings.
How will this impact plan administration?
Many experts believe that this provision will improve retirement readiness for participants who are nearer to retirement age. However, it will also increase the administrative complexity for plans in several ways. In general, this provision will be significant for plans that currently do not offer catch-up contributions or have a Roth option.
Please continue to reach out to your financial professional or Corebridge financial professional for more information about whether adding a Roth option to your qualified plan makes sense.
*Federal Insurance Contributions Act (FICA) is a U.S. federal payroll tax that allows you to earn credits for Social Security benefits.
This material is general in nature, was developed for educational use only, and is not intended to provide financial, legal, fiduciary, accounting or tax advice, nor is it intended to make any recommendations. Applicable laws and regulations are complex and subject to change. Please consult with your financial professional regarding your situation. For legal, accounting or tax advice consult the appropriate professional.
