November 2025

NEWS FROM D.C.

SECURE 2.0 Act final regulation and guidance on catch-up contributions

On September 15, 2025, the IRS issued final regulations addressing SECURE 2.0 Act provisions, which offered clarity and long-awaited guidance pertaining to catch-up contributions. Below is a high-level summary of key elements of the final regulation, important dates and helpful reminders.

Summary of key elements and important dates regarding catch-up contributions

• The implementation date of Section 603 (required deemed Roth catch-up contributions) has not been delayed and remains effective for taxable years after December 31, 2025. (For background, on August 25, 2023, the IRS issued Notice 2023-62, which effectively delayed for two years the requirement that certain catch-up contributions in 401(k), 403(b) or governmental 457(b) plans be deemed and made as Roth contributions.)
• Many of the operational features are predicated upon plan sponsors' payroll provider software capabilities. Plan sponsors should work with their payroll provider/team to understand options prior to the above deadlines.
• The deemed Roth catch-up contribution provision remains effective January 1, 2026. However, the final regulations provide for an “applicability date” of January 1, 2027. Plans can apply a good faith interpretation to comply for plan years prior to January 1, 2027, giving them time to implement the final regulatory guidance by that date.
• Note: Catch-up contributions are an optional plan feature. However, if a plan permits catch-up contributions but does not currently offer a Roth contribution feature in the plan, the plan will have to be amended to offer a Roth contribution feature to comply with the deemed Roth catch-up contribution provision.
• If your plan does not currently offer Roth contributions and you wish to amend it to comply with the Roth catch-up requirement, formal direction was due to us by September 30, 2025.
• Decisions about how a plan will administer the Roth catch-up requirement must be captured on our election form and submitted to us by December 1, 2025.

Clarification on how to implement a “deemed Roth election”

• For plans that provide for separate catch-up elections, the deemed Roth election can apply before a participant reaches the annual elective deferral limit. Deemed Roth contributions do not have to be recharacterized even if the participant did not reach the contribution limit.
• The deemed Roth election must cease to apply within a reasonable period following the date on which an employee ceases to be subject to the Roth requirement (for example, transfers to an unrelated employer) or an amended W-2 is filed indicating the employee is below the wage threshold.

Wages used to identify high earners

• Social Security wages reported in Box 3 on Form W-2 should be used to determine which employees are high earners. Do not use Box 5.
• Wages among related employers — including controlled groups or common paymasters — may be aggregated to identify high earners. Wages for unrelated employers in multiple employer or multi-employer plans cannot be aggregated for this purpose.
• In certain asset transactions, wages from a predecessor employer may be aggregated with the successor employer.

Nondiscrimination testing and corrections

• A plan must implement the deemed Roth election in order to utilize the W-2 or in-plan Roth rollover correction method to convert pre-tax contributions that should have been designated as Roth catch-up. Note: The regulations have been updated to permit the employer flexibility to use either or both correction methodologies during the plan year, provided that the plan sponsor applies the same methodology for similarly situated participants.
• Correction deadlines have generally been extended but penalties may still apply with respect to 402(g), 415(c) or ADP excess amounts that are not completed in a timely fashion. Also, the regulations have provided two exceptions to correcting pre-tax amounts that should have been designated as Roth catch-up: 1) amounts of $250 or less; or 2) if a participant became subject to Roth mandate solely because their preceding year's wages were not determined to exceed the threshold until after the deadline for correction.
• The in-plan Roth rollover correction can be used even if the plan doesn’t otherwise allow in-plan Roth rollovers.

Other notable provisions

• Requiring that all participants, irrespective of wages, make catch-up contributions on a Roth basis is not permitted.
• The higher catch-up limit at ages 60–63 is an optional plan feature; however, compliance with the deemed Roth catch-up provision is mandatory.
• Plans that are qualified under both the U.S. and Puerto Rico tax codes (“Dual-Qualified Plans”) do not have to offer non-Roth after-tax catch-up contributions to adhere to universal availability requirements until such time that the Puerto Rico tax code is updated to allow Roth contributions.