SECURE 2.0 Roth Catch-Up Rules: Who Qualifies and What Employers Need to Know

Roth catch-up requirements are adding a new layer of operational complexity to retirement plans, especially for organizations with variable compensation and multi-entity structures.

For plan sponsors, the challenge is not just understanding the rule. It is how easily compensation, plan design, and payroll execution can fall out of alignment over the course of a year.

“I would just really like to stay ahead of the chaos a little bit.” (Katherine)

That starts with understanding how these rules actually work in practice.

How Roth Catch-Up Requirements Work

Under current rules, participants who exceed certain compensation thresholds may be required to make catch-up contributions on a Roth basis instead of pre-tax.

This introduces a moving target. Compensation is not static, and contribution treatment may need to change based on when and how income is earned. Employees who receive bonuses, commissions, or late-year adjustments can cross thresholds after contributions have already been made.

When that happens, plans may need to revisit how those contributions were categorized, which can impact testing outcomes and administrative processes.

Why Timing Creates Problems

The issue is rarely identifying high earners. It is identifying them early enough.

A participant may appear under the threshold for most of the year, only to exceed it after a late compensation event. At that point, contributions that were made earlier in the year may no longer align with how they should be treated.

This is where plans move into correction mode. Adjustments may be required across payroll, plan administration, and reporting. These situations typically surface during year-end testing, when there is less flexibility to resolve them efficiently.

Controlled Groups: Aggregation of Compensation

For organizations with multiple related entities, controlled group rules significantly impact how compensation is evaluated.

“Let’s expand it to a controlled group… two different employers, but enough common ownership that accounts as a single employer.” (Christopher)

In a controlled group, entities are treated as a single employer under ERISA. That means compensation must be viewed collectively, not separately.

“You’ve got controlled groups. You add up their W-2s to determine if they’re over 150 (updated 2026)” (Christopher)

This aggregation directly affects whether a participant exceeds the compensation threshold tied to Roth catch-up requirements. An employee earning income from multiple related entities may appear below the threshold in each individual payroll system, but exceed it once compensation is combined.

Without a coordinated view of compensation, this is where misclassification can occur.

Multiple Employers: When the Rules Shift

Not all multi-entity arrangements are controlled groups.

“Multiple employer presumes there’s not enough common ownership to count it as a single employer.” (Christopher)

In situations where employers are unrelated, compensation is not automatically aggregated in the same way. A participant working for two separate employers may have significant income from each, but thresholds do not necessarily apply as if it were one combined amount.

Understanding this distinction is essential. Applying controlled group logic to unrelated employers can lead to incorrect assumptions about contribution requirements.

The 402(g) Deferral Limit Still Applies Per Individual

One rule remains consistent regardless of structure.

“The 402(g) limits… are always per calendar and are always per individual taxpayer.” (Christopher)

Even if a participant works for multiple employers, their elective deferral limit is tied to the individual. Contributions made across different employers still count toward one annual limit.

This is a common area of confusion, particularly in multi-employer scenarios where contributions are made in more than one place.

Plan Design Drives Flexibility

Plan design plays a central role in managing Roth catch-up requirements.

“All of our plan sponsors have added Roth and have catch-up… the idea is to give your plan sponsors options.” (Christopher)

Plans that include Roth contributions and catch-up provisions are better positioned to handle changes in compensation and evolving regulatory requirements. These features create flexibility when thresholds are crossed mid-year.

“Why take an essentially free option away from a participant or a plan sponsor?” (Christopher)

Limiting plan features may simplify administration initially, but it often reduces the plan’s ability to adapt when circumstances change.

Coordination Across Systems Is Critical

Even with the right plan design, execution depends on alignment between systems.

Payroll providers, TPAs, and recordkeepers each play a role in how these rules are applied. If they are not working from the same data or assumptions, discrepancies can arise.

These issues rarely stem from a single failure point. They tend to occur in the gaps between systems, where information is incomplete or delayed.

Preparing for What’s Ahead

Roth catch-up requirements are part of a broader shift toward more dynamic plan administration. As compensation structures become more variable and organizations operate across multiple entities, the need for coordination increases.

“I really want to ring the bell right now… get your plan in order so you don’t feel as much of this pain.” (Katherine)

Plans that are structured with flexibility, supported by aligned systems, and guided by the right expertise will be better equipped to handle these changes. Plans that are not will encounter these issues later, when the ability to adjust is more limited.