A provision buried in the 2022 retirement law took effect this January, and it changes something for a specific group of people in the years when they are usually saving hardest. If your Social Security wages from your employer last year exceeded a threshold, your catch-up contribution to that employer's 401(k), 403(b) or governmental 457(b) plan this year must be made as Roth. After tax. No current-year deduction.
The threshold is the first thing to get right, because a great deal of what is written about this is wrong. The Internal Revenue Service raised it in November 2025 for the 2025 measurement year, from a hundred forty-five thousand dollars to a hundred fifty thousand. Since the test looks back one calendar year, the operative question for 2026 contributions is whether 2025 Social Security wages exceeded a hundred fifty thousand dollars. A large share of articles published this year, including recent ones, still print the older figure.
Which Wages, From Which Employer
The measurement is narrower than it sounds and the narrowness is where the surprises live. It is Social Security wages, the figure in Box 3 of the W-2, not total compensation and not adjusted gross income. It is prior-year wages, so a person who retires or changes jobs is tested on a year they may no longer be in. And it is wages from the one employer that maintains the plan. Wages from a different, unrelated employer do not aggregate, so someone earning ninety thousand at each of two jobs is under the threshold at both. The final regulations permit but do not require plans to combine wages across a controlled group, which means two people with identical total pay can land on opposite sides of the line purely because of how their employers wrote the plan document.
There is also a carve-out that matters enormously to those it covers: a participant with no Social Security wages from the sponsoring employer in the prior year is outside the rule entirely. The clearest case is a self-employed partner drawing only self-employment income, who may keep making pre-tax catch-up contributions regardless of how much they earned.
The Mechanics of a Rule With No Pre-Tax Fallback
The provision has one feature that deserves more attention than it gets. If a plan does not offer a Roth option at all, the regulations do not force the employer to add one. Instead the plan may permit catch-up contributions from participants not subject to the rule and simply not permit them from participants who are, without running afoul of the usual universal availability or nondiscrimination requirements. In other words, the consequence of being a high earner in a plan without a Roth feature is not a pre-tax catch-up. It is no catch-up.
Plans that do offer Roth are handling it quietly. The regulations allow a plan to deem an affected employee to have irrevocably designated their catch-up as Roth, provided the employee gets a real opportunity to elect otherwise or to stop deferring. Practically, payroll flips the election and the change shows up as a smaller net paycheck rather than as a letter.
The Numbers and the Trade
The 2026 limits are worth having in hand. The elective deferral limit is twenty-four thousand five hundred dollars. The age fifty catch-up is eight thousand. The enhanced catch-up for ages sixty through sixty-three, sometimes called the super catch-up, stays at eleven thousand two hundred fifty. So the practical ceiling is thirty-two thousand five hundred at fifty through fifty-nine and again at sixty-four and older, and thirty-five thousand seven hundred fifty in the four years from sixty to sixty-three.
For an affected saver, that eight thousand or eleven thousand two hundred fifty now carries no deduction. At a thirty-two percent marginal rate that is roughly twenty-five hundred to thirty-six hundred dollars of deferral given up this year, in exchange for growth and qualified withdrawals that come out untaxed later. That is not obviously a bad trade, and for someone expecting a similar or higher bracket in retirement it is arguably a better one. It is simply a different trade than last year's, made for them, by statute.
Two Dates and One Question
One nuance is causing real confusion among employers: the statutory requirement applies from January 1 this year, while the regulations themselves generally apply to plan years beginning after the end of it, with good-faith compliance expected meanwhile. Collectively bargained and governmental plans get later dates.
The change is not that the catch-up got smaller, it is that for higher earners it stopped reducing this year's taxable income, and for anyone in a plan without a Roth feature it may have stopped being available at all. The question worth putting to a benefits department before the year runs out is simply whether the plan offers Roth and whether payroll has already switched the catch-up election, because the answer determines whether the money is going in after tax or not going in.
— John Stone