IRS Finalizes Catch-Up Contribution Rules: What Retirement Savers Need to Know

The IRS recently issued final guidance on regulations implementing one of the most anticipated elements of the SECURE 2.0 Act: catch-up contributions. While marketed as a way to boost retirement savings, these rules come with detailed compliance requirements that employees, employers, and plan administrators must carefully navigate.

What Changed

Catch-up contributions allow workers age 50 and older to make additional contributions to their 401(k), 403(b), or similar retirement accounts beyond the standard annual limit. Under SECURE 2.0, higher-income earners – those making more than $145,000 (don’t forget to consider inflation), are now required to make their catch-up contributions on a Roth (after-tax) basis rather then pre-tax basis.

The IRS final regulations clarify how this rule applies beginning in the 2026 plan year, providing a brief window for employers to update payroll and plan systems. In addition, the regulations outline how plan sponsors must track participant wages, designate contributions correctly, and handle administrative errors.

Why this matters to Employees

For employees approaching retirement, catch-up contributions can significantly increase savings. But the new Roth-only requirement for higher earners changes the tax picture: instead of receiving an immediate deduction, contributions are taxed up front but can grow tax-free. Whether this shift is beneficial depends heavily on an individual’s broader tax situation, projected income in retirement, and estate planning goals.

Why this matters to Employers

Employers sponsoring retirement plans now face heightened compliance duties. They must determine which employees are subject to the Roth requirement each plan year, update plan documents and payroll systems to properly handle Roth designations, and provide clear communications to participants so they understand their options. This could be problematic if misclassification or administrative missteps occur as this may result in qualification issues or IRS penalties.

The Value of Legal Guidance

While these regulations provide clarity, they also add complexity. Employers and high-income employees alike should consider seeking advice from a trusted tax attorney to analyze tax implications of Roth versus pre-tax savings strategies, ensure plan amendments and payroll processes meet IRS requirements, and avoid inadvertent compliance failures that could trigger audits or penalties.

Final Thoughts

SECURE 2.0’s catch-up contribution rules are designed to encourage stronger retirement enthusiasm, but the fine print makes careful planning essential. With the IRS final regulations in place, both employers and employees should take proactive steps to align their strategies with the new framework. Consulting a trusted tax attorney can provide peace of mind that your retirement savings and compliance obligations are being managed correctly and effectively.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

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Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.