The highly anticipated annual update to retirement plan contribution limits has been released by the IRS. While most figures are straightforward, two specific adjustments involving catch-up contributions are generating significant confusion for plan sponsors and participants. These changes, stemming from the SECURE 2.0 Act, impact who can make catch-up contributions and how that limit is calculated moving forward.
At Calvetti Ferguson, we know retirement plan administration can be complex. We want to help you understand these new distinctions to ensure compliance and help your participants maximize their savings opportunities.
The Mandatory Roth Catch-up Threshold
The SECURE 2.0 Act introduced a special provision requiring high earners to make their catch-up contributions on a Roth (after-tax) basis. This rule takes effect on January 1, 2026.
The IRS has finalized the specific compensation benchmark for this rule: $150,000. This is the specific W-2 wage threshold used to determine who is subject to the mandatory Roth catch-up requirement in 2026.
Administrative Distinction: If a participant’s Box 3 W-2 compensation in 2025 is above $150,000, that individual is classified as a “high earner” for the subsequent year. Consequently, they will be required to make any catch-up contributions in 2026 on a Roth basis.
This schedule is different from the determination for Highly Compensated Employees (HCEs). The HCE limit is based on compensation earned in 2026 and is used for determining HCE status in 2027. Maintaining this distinction between “look-back” years and purpose is essential for accurate plan administration.
Indexing the Super Catch-Up Contribution Limit
Another area requiring clarification is the evolution of the SECURE 2.0 “super catch-up” provision for participants aged 60 through 63.
The initial 2025 super catch-up limit was calculated at 150% of the regular 2024 catch-up contribution, resulting in a limit of $11,250.
The New Indexation Rule: Effective 2026 and moving forward, the methodology shifts. Instead of recalculating the limit as 150% of the regular catch-up amount each year, the IRS will now index the initial $11,250 amount to the Cost-of-Living Adjustment (COLA).
This change means the super catch-up limit is now on its own independent indexation path and is no longer directly tied to the regular catch-up contribution number. For the 2026 calendar year, the indexed amount remained stable at $11,250, as no COLA increase was applied.
What You Should Do Next
These changes to the 2026 retirement contribution limits can impact your plan’s administrative procedures and your participant communications. Proactive planning is essential to ensure compliance and help your employees fully utilize these benefits. We encourage you to:
- Review Your Plan Documentation: Ensure your plan language and procedures reflect the new mandatory Roth contribution requirements for high earners.
- Update Participant Communications: Clearly communicate the $150,000 threshold and the required Roth basis to participants before the 2026 plan year begins.
- Model Future Limits: Understand that the super catch-up limit will now follow a separate, COLA-based path, which should be factored into long-range projections.
The administrative rules governing retirement plans are detailed. Our team at Calvetti Ferguson is here to help you navigate these changes and maintain compliance for your retirement plan.
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