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 familiar. The operational coordination it requires is what elevates the conversation.
On paper, the mandate is straightforward. Employees who are eligible for catch-up contributions must make those contributions as Roth if their prior-year wages exceeded the statutory threshold. When a plan does not support Roth catch-ups, the participant cannot make catch-up contributions for that year.
For organizations operating across multiple entities, shared payroll systems, or evolving corporate structures, this requirement calls for preparation well before year-end. Alignment across plan design, payroll operations, recordkeepers, and fiduciary oversight becomes essential.
As Christopher and Katherine Tipper of Hunter Benefits explained during our discussion, the key question for employers is whether the plan structure and operational workflow are ready to process the rule correctly.
“Get Roth in your plan. Have the flexibility. Have it there.”
How Roth Catch-Up Contributions Work in 2026
For the 2026 plan year, the Roth catch-up requirement applies when three conditions are met:
- The participant is eligible for catch-up contributions, generally age 50 or older
• The participant’s prior-year FICA wages exceeded the statutory threshold based on 2025 wages
• The participant elects to make catch-up contributions
When those conditions are present, catch-up contributions are required to be Roth.
The determination relies entirely on the prior year’s wages. Payroll in the current year does not influence the rule.
As Christopher Tipper explained:
“Did you have over the threshold on your W-2 in the prior year? Yes or no. That is binary.”
What Wages Are Used to Determine Roth Catch-Up Eligibility?
The statute relies on prior-year FICA wages reported on Form W-2.
That definition sounds simple until it intersects with real payroll systems.
Payroll providers do not always surface wage data in the same format. Recordkeepers ingest and process files differently. Multi-entity organizations often operate multiple payroll environments simultaneously.
Katherine Tipper summarized the industry reality clearly:
“Nobody has decided this is how the information is transmitted from one entity to the other. Nobody has decided on a standard.”
As a result, operational accuracy depends on communication between systems rather than interpretation of the statute alone.
Safe Harbor vs. Non–Safe Harbor Plans in the Roth Catch-Up Environment
Much of the early discussion around Roth catch-ups focuses on Safe Harbor plans. Safe Harbor design removes the need for ADP testing, which simplifies the interaction between catch-up contributions and nondiscrimination rules.
The operational environment becomes more nuanced when a plan does not use Safe Harbor.
Christopher Tipper described the difference during our conversation. In a non–Safe Harbor plan, nondiscrimination testing continues to apply after the plan year closes.
For the 2026 plan year, testing will occur in 2027.
At that stage, the plan evaluates whether highly compensated employees deferred more than permitted relative to other participants. When a failure occurs, the statute determines how the contributions are classified and corrected.
In this context, the plan document and the governing statute determine what qualifies as catch-up contributions.
Payroll systems and participant elections do not determine the classification.
As Christopher explained:
“Statute and the plan document determine what is catch-up, not your payroll vendor and not the employee participant.”
This distinction becomes important when an employee with prior-year wages above the threshold participates in a non–Safe Harbor plan.
If ADP testing identifies excess deferrals, some of those deferrals may be reclassified as catch-up contributions. Under the Roth catch-up rule, those amounts are treated as Roth.
That reclassification can also influence future reporting.
In some cases, a participant could see a Form 1099-R issued in a later year related to the adjustment of contributions originally made earlier in the testing cycle.
The operational takeaway for employers is that Roth catch-up compliance intersects directly with nondiscrimination testing and plan design.
How Does This Apply to Multi-Entity or Controlled Group Employers?
Single-entity employers experience operational changes. Multi-entity employers experience structural ones.
Employees may receive wages from multiple EINs. Organizations may function as controlled groups, affiliated service groups, or broader multi-entity structures participating in a single plan.
Payroll environments may be centralized, partially centralized, or fully distributed across different vendors.
In these environments, determining whether an employee exceeded the wage threshold requires consistent data flow between payroll and the retirement plan recordkeeper.
Clear procedures for identifying eligible participants and transmitting the correct indicators become essential.
When these procedures are defined and documented in advance, the operational workflow remains stable as the rule takes effect.
Does Our 401(k) Plan Need Roth and Catch-Up Features to Stay Compliant?
The Hunter Benefits discussion also touched on an operational reality many employers encounter when reviewing plan design.
Plans that support Roth contributions and catch-up contributions maintain greater operational flexibility when regulatory changes occur.
Christopher Tipper summarized this dynamic clearly.
“Adding Roth and adding catch-up is removing complexity.”
When plans support these features, contribution sources can be classified and tracked accurately. Recordkeepers can process corrections when necessary. Participants retain access to the contribution options the law permits.
What Do Payroll and Recordkeepers Need to Coordinate for Roth Catch-Ups?
The Roth catch-up rule assumes a level of coordination across the retirement ecosystem.
Recordkeepers depend on payroll providers to identify whether employees exceeded the prior-year wage threshold. Payroll providers must transmit that information in a way recordkeeping systems can interpret.
Christopher described how recordkeepers are approaching the issue operationally.
“The recordkeepers are expecting a code from the payroll vendors whether or not somebody crossed the threshold.”
Establishing that workflow early helps ensure contributions are posted correctly and tracked in the appropriate source.
What Does “Good Faith Compliance” Mean for 2026?
Regulators have indicated that plans will receive flexibility during the early implementation period.
Plans operating in good faith during taxable years beginning before 2027 will receive consideration when errors occur.
Good faith involves preparation, communication with vendors, and timely correction of issues when they arise.
Christopher addressed the importance of engagement with plan operations during this transition.
“Completely ignoring things… we do not feel is in good faith.”
Employers that prepare their systems, communicate with service providers, and monitor contribution processing position themselves well under this standard.
What Should Employers Do Before the End of 2025?
Preparation for 2026 begins during 2025.
Employers benefit from confirming that their plan permits Roth contributions and catch-up contributions. Payroll providers should confirm how prior-year wage thresholds will be identified and transmitted. Recordkeepers should confirm their ability to track Roth catch-up sources accurately.
Documenting the correction process before problems arise also strengthens plan administration.
Christopher Tipper summarized the approach clearly:
“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 rule reveals how well the retirement plan ecosystem functions together.
Plans supported by coordinated payroll systems, capable recordkeepers, and engaged retirement plan consultants navigate the transition smoothly.
Christopher offered a simple reminder that applies to many regulatory changes.
“Read what your vendors send you.”
At The Asteri Collective, we view the Roth catch-up rule as part of a broader shift in how retirement plans operate. Plan design, payroll data, and operational processes increasingly move together as a connected system.
The organizations that build that alignment now will enter 2026 prepared for the next generation of retirement plan administration.
