How Wages Determine Roth Catch-Up Contributions in 2026

What Multi-Entity Employers Need to Know

Beginning in 2026, the SECURE 2.0 Roth catch-up requirement becomes operational. For many employers, the rule itself is not new. What is new is the level of coordination it demands.

On paper, the mandate is simple. For employees who are eligible for catch-up contributions, those contributions must be made as Roth if the employee exceeded the statutory wage threshold in the prior year. If the plan cannot support Roth catch-ups, the employee cannot make catch-up contributions at all.

In practice, particularly for employers with multiple entities, shared payroll systems, or evolving organizational structures, this change is not a switch that can be flipped at year-end. It requires advance alignment between plan design, payroll operations, recordkeepers, and fiduciary oversight.

As Christopher and Katherine Tipper of Hunter Benefits put it bluntly, the challenge is less about interpreting the statute and more about whether plans are built to absorb it.

“Get Roth in your plan. Have the flexibility. Have it there.”

How Do Roth Catch-Up Contributions Work in 2026?

For the 2026 plan year, the Roth catch-up requirement applies if all of the following are true:

• The participant is eligible for catch-up contributions, generally age 50 or older
• The participant’s prior-year FICA wages exceeded $150,000, based on 2025 wages
• The participant elects to make catch-up contributions

When those conditions are met, catch-up contributions must be Roth. If the plan does not allow Roth contributions or does not allow catch-ups at all, the participant loses the ability to make catch-up contributions for that year.

One point from the Hunter Benefits discussion bears repeating because it is so often misunderstood. This is a lookback rule, not a forecast.

“Did you have over $150,000 on your W-2 in 2025? Yes or no. That is binary.”

What an employee earns in 2026 has no bearing on whether their catch-up contributions for that year must be Roth. The determination is locked in based on the prior year.

What Wages Are Used to Determine Roth Catch-Up Eligibility?

The statute looks to prior-year FICA wages reported on Form W-2. That sounds straightforward until it meets the real world.

Payroll systems do not all define or surface wage data the same way. Recordkeepers do not all ingest or interpret that data consistently. And in environments where multiple payroll providers or multiple employing entities are involved, there is no universally adopted standard for how this information is transmitted.

As Katherine Tipper noted, this lack of standardization is one of the quiet pressure points of the rule.

“Nobody has decided this is how the information is transmitted from one entity to the other. Nobody has decided on a standard.”

The result is that compliance depends less on legal interpretation and more on whether payroll and recordkeeping systems are actually speaking the same language.

How Does This Apply to Multi-Entity or Controlled Group Employers?

Single-entity employers will face operational changes. Multi-entity employers face structural ones.

Employees may receive compensation from more than one EIN. Organizations may operate as controlled groups, affiliated service groups, or looser multi-entity arrangements that still participate in a single plan. Payroll may be centralized, partially centralized, or fully fragmented across vendors.

In these environments, determining who crossed the wage threshold, how that determination is made, and how it flows into contribution processing requires intentional design. Without it, errors are not edge cases. They are expected outcomes.

This is why the conversation around Roth catch-ups quickly becomes a conversation about plan architecture, not just payroll mechanics.

Does Our 401(k) Plan Need Roth and Catch-Up Features to Stay Compliant?

A recurring theme in the Hunter Benefits discussion was the misconception that fewer plan features mean less complexity. In reality, the opposite is often true.

Plans that lack Roth or lack catch-up provisions do not become simpler under SECURE 2.0. They become more brittle.

“Adding Roth and adding catch-up is removing complexity.”

Without those features, employers remove flexibility precisely when flexibility is needed to manage new compliance rules. Participants lose options. Plans lose room to correct issues cleanly. Refunds, recharacterizations, and testing complications become more likely, not less.

At a baseline, plans heading into 2026 should support Roth contributions, catch-up contributions, and clear source tracking at the recordkeeper level. For many employers, Safe Harbor design will also become part of the conversation, particularly when looking ahead to how 2026 deferrals will be tested in 2027.

What Do Payroll and Recordkeepers Need to Coordinate for Roth Catch-Ups?

The Roth catch-up mandate assumes a level of coordination that does not yet exist universally.

Recordkeepers are expecting payroll systems to identify whether an employee exceeded the prior-year wage threshold. Payroll systems vary widely in how prepared they are to do this consistently, especially across multiple entities or vendors.

“The recordkeepers are expecting a code from the payroll vendors whether or not somebody crossed the threshold.”

This is not resolved through a single phone call or a one-time update. It requires ongoing communication, documented procedures, and confirmation that contributions are being posted to the correct source.

What Does “Good Faith Compliance” Mean for 2026?

Final regulations allow for reasonable, good-faith implementation approaches for taxable years beginning before 2027. That flexibility has led some plan sponsors to believe they can defer action.

That interpretation is risky.

Good faith does not mean ignoring the rule. It does not mean waiting until testing reveals a problem. It means making a sincere, documented effort to comply, issuing notices, working with capable vendors, and correcting errors promptly when they occur.

“Completely ignoring things… we do not feel is in good faith.”

Plans that stumble while actively trying to comply are treated very differently than plans that delay preparation altogether.

What Should Employers Do Before the End of 2025?

As 2025 closes, employers that want to enter 2026 on solid footing should focus on a few foundational steps.

They should confirm, in writing, whether their plan permits Roth and catch-up contributions. They should understand how prior-year wage threshold status will be identified and transmitted, particularly if more than one payroll system is involved. They should ensure their recordkeeper can properly track Roth catch-up sources. And they should document a compliance and correction process before problems arise.

Or, as Christopher Tipper summarized it more plainly:

“Find out what you’ve missed and correct it as soon as possible.”

Why Roth Catch-Up Is a Broader Readiness Test for Employers

The Roth catch-up mandate is not just a tax rule. It is a stress test for how well the retirement ecosystem actually functions.

Plans that rely on passive administration and assume vendors will “figure it out” later are more likely to struggle. Plans supported by engaged payroll providers, capable recordkeepers, and active retirement plan consultants are better positioned to adapt.

“Read what your vendors send you.”

At The Asteri Collective, we view this change as an inflection point, not only for Roth catch-up compliance, but for how plan design, data flow, and fiduciary accountability are handled across the industry. Because 2026 is not the year to discover your plan was never designed to handle change.