Your Highest Earners Are About to Get a Paycheck Surprise: the 2026 Roth Catch-Up Rule Nobody Warned You About

This site contains affiliate links. View the disclosure for more information.

A 58-year-old VP named Karen has been maxing out her catch-up contributions for years. Pre-tax. Same election, every January, like clockwork. She likes the tax break now, and she has never once had to think about it.

This year, she logs into payroll and her take-home pay is lower than she expected. The catch-up money she always put in before taxes is now coming out after taxes. Nobody told her. So she does what every confused employee does. She emails you.

And here is the part that stings: you didn’t choose to change anything. The IRS did. But you’re the one holding the explanation bag.

The rule changed in 2026, and your high earners are the ones who feel it

Here’s the plain-English version. Starting in 2026, if an employee earned more than $150,000 in 2025, any catch-up contribution they make has to go in as Roth, which means after-tax. They no longer get to choose pre-tax for that catch-up money. The choice is gone.

This comes out of the SECURE 2.0 Act, and the final rules landed in September 2025, so 2026 is the first year it’s actually live on real paychecks. Two things are true at once: the regular contribution limits went up, and the rules for who can do pre-tax catch-up got narrower. Your employees will feel both at the same time, and they will not know why.

The 2026 numbers, exactly

These are the 2026 amounts, and they tick up most years. Keep them exact when you quote them, because employees will hold you to the dollar:

Your age in 2026	Catch-up amount	Total you can defer
Under 50	None	$24,500
50 to 59	$8,000	$32,500
60 to 63	$11,250 (super)	$35,750
64 and up	$8,000	$32,500

The catch-up piece is the part people miss. A 61-year-old can put in $11,250 on top of the $24,500 base. That’s the “super” catch-up for ages 60 to 63, and it’s a real number on a real paycheck. (You might hear someone call it the “super saver” option. Officially it’s the super catch-up, so if an employee uses the other name, that’s the one they mean.)

Who actually gets hit by the Roth rule

Not everyone. The forced-Roth catch-up only applies to employees who cleared the income line. Here’s who’s in and who’s out:

• Affected: anyone who earned more than $150,000 from your company in 2025 AND is making catch-up contributions in 2026.
• Not affected (this year): anyone under that income line. They can still choose pre-tax or Roth for their catch-up, same as always.
• Not affected at all: anyone under 50, because they can’t make catch-up contributions in the first place.

One more thing the law watchers flag: the $150,000 line is based on what the employee earned from you, the employer running the plan. It’s tied to the wages your payroll reported, not their household income or a side job. That distinction is exactly the kind of detail your record keeper or plan advisor will confirm in writing if you ask.

The three ways this goes sideways on your desk

This isn’t really an investment problem. It’s an operations problem, and it lands in three predictable places. Lead with the mistake, because the skimmer needs to know which one is about to be them.

Watch out for 1. The payroll deduction flips and nobody told the employee. Their catch-up moves from pre-tax to Roth, take-home pay drops, and the first they hear of it is their own pay stub. That’s a trust problem before it’s a tax problem. 2. Your plan doesn’t even offer Roth yet. If a high earner is eligible for catch-up but your plan has no Roth option, the law’s answer is blunt: they may not be able to make catch-up contributions at all until the plan adds one. That’s a plan-document gap you want to find before an employee does. 3. The system mapping is wrong. Someone crosses the $150,000 line, but the payroll-to-recordkeeper feed still routes their catch-up as pre-tax. Now it’s miscoded, and you’re untangling it after the fact instead of before.

What to actually do, in order

You don’t have to become a tax expert. You have to run a short checklist and route the hard questions to the people whose job it is to answer them. Here’s the order:

1. Pull your over-$150K list. Work with payroll to flag everyone who earned more than $150,000 from your company in 2025. That’s your affected population. Start there.
2. Confirm your plan even has a Roth option. Check your plan document, then confirm with your record keeper. If there’s no Roth source, that’s the urgent gap, because your catch-up-eligible high earners can’t comply without it.
3. Verify the payroll-to-recordkeeper mapping. For your affected list, make sure the catch-up dollars are actually coded as Roth in the feed between payroll and your record keeper. Don’t assume the integration caught it. Pull a sample and check it line by line, the same way you’d reconcile any other deduction.
4. Tell the affected employees before their first 2026 catch-up runs. One short, plain message: “If you earned over $150,000 last year and you make catch-up contributions, that money is now Roth (after-tax) starting in 2026. Your take-home may change. Here’s who to call with questions.” Getting ahead of it turns 40 panicked emails into zero.
5. Route the “is this good or bad for me?” questions to your plan’s advisor. This is the most important move you’ll make, so read the next section before you answer a single one.

You are not their financial advisor. You are their router.

Here’s the trap. An employee is going to ask you, “So is Roth better for me or not?” And it’s tempting to answer, because you just learned all this and you want to help. Don’t. The second you tell someone which tax treatment is better for their situation, you’ve stepped into advice you’re not licensed to give, and you’ve taken on risk that isn’t yours to carry.

Your job isn’t to know which bucket is right for Karen. Your job is to know who does and to put her in front of them. Your plan already pays for that help, and most admins forget it’s sitting there:

• Your record keeper (Fidelity, Principal, Empower, and the like) almost always runs free participant webinars and one-on-one sessions. Push those out.
• Your plan’s financial advisor or 3(21)/3(38) fiduciary can speak to individual situations in a way you legally can’t. That’s literally what they’re there for.
• Your TPA or record keeper can confirm the plan-specific mechanics, like whether your plan auto-converts or requires a new election.

One quiet note for the plan sponsor side

Admin only — not for employee-facing copy If your plan doesn’t currently offer Roth, this rule is the forcing function to add it, because without it your catch-up-eligible high earners are stuck. Raise it with leadership and your record keeper now, not at year-end. Frame it as a compliance gap, not a nice-to-have. And document the conversation, because “we knew and didn’t act” is a worse position than “we caught it and fixed it.” This is a plan-design decision for the sponsor, so keep it out of the employee-facing message, which is only ever “here’s what changed and who to call.”

Where to start this week

If you only do three things before your next payroll run:

• Get the free translation. Grab the 401(k) Translation Cheat Sheet so you have plain-English answers ready when the questions start. (Free — it’s the fastest way to stop guessing on the spot.)
• Pull your over-$150K list and check for a Roth option. Those two facts tell you the size of your exposure in about an hour.
• Line up your record keeper’s education resources. Have the webinar link and the advisor contact ready to forward, so every “is Roth better?” question has a destination that isn’t you.

And if the 401(k) is brand new to you and the recordkeeper-TPA-fiduciary-auditor web feels like alphabet soup, that’s the whole reason the 90-Day Playbook exists. It walks a new benefits admin through every partner relationship and every system, in order, so the next rule change lands on a foundation instead of a scramble. It’s at ericakirby.com when you’re ready.

This is the plain-English version to get you oriented, not legal or tax advice. Before you act on any of it, confirm the specifics with your broker, your benefits counsel, your record keeper, or your filing software. My job here is to make it make sense, not to be your lawyer.

Nobody should have to figure this out alone, and definitely not from a confused employee’s pay stub.

This site contains affiliate links. View the disclosure for more information.