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

SECURE 2.0 introduced a new level of precision into retirement plan administration. The Roth catch-up requirement is not applied broadly across all employees. It is highly specific, and understanding exactly who qualifies is critical for employers managing payroll and compliance. The rule itself is straightforward, but the challenge is identifying who it applies to and ensuring systems are set up to handle it correctly.

Who the Roth Catch-Up Rule Applies To

The $150,000 W-2 Threshold

The Roth catch-up requirement applies to employees age 50 and older who exceed a defined compensation threshold. The numbers have been updated since we recorded this video but the understanding of the rule stands: “What we are looking for is employees with W-2 wages in excess of [$145,000 sic] $150,000 in 2025,” explains Christopher Tipper. This determination is based specifically on Box 3 of the W-2, not total income or ownership structure. If an employee meets that threshold, any catch-up contributions must be made as Roth.

W-2 Employees Only

This rule does not apply to all earners. It is limited strictly to W-2 employees. “It does not affect employees who are K-1 or Schedule C. It is only W-2 employees.” This distinction is especially important for business owners and partners who may receive income through different structures.

The “Highly Paid Individual” (HPI)

Employees who meet the $150,000 threshold fall into a new classification referred to as a Highly Paid Individual. For these individuals, the rule is direct. If they make catch-up contributions, those contributions must be Roth.

A Binary Rule with No Flexibility

A Yes-or-No Determination

This rule does not leave room for interpretation. “Did you have over $150,000 on Box 3 on your W-2 in 2025? Yes or no. That is binary.” That clarity simplifies eligibility but increases the importance of accurate payroll data and reporting.

What Happens If the Plan Is Missing Key Features

The rule does not require employers to offer Roth contributions or catch-up provisions. However, it does limit what can be done if those features are not in place. If a plan does not include Roth or catch-up, employees cannot make catch-up contributions once they exceed the threshold, employers lose flexibility in managing contributions, and correction processes may become necessary if contributions are mishandled. The absence of these features does not eliminate complexity. It shifts it into compliance risk.

Why Plan Awareness Matters

Employers Need to Know What Is in Their Plan

One of the most common issues is a lack of visibility into plan design. “You need to know whether you have Roth,” Christopher Tipper notes. This responsibility sits with plan sponsors and administrators. Understanding what is included in the plan is foundational to executing it correctly.

The Role of the Summary Plan Description

For employers unsure about their plan features, the answer is already documented. The Summary Plan Description outlines whether Roth contributions and catch-up provisions are included, making it a practical starting point for identifying gaps.

Payroll Is Where Execution Happens

Contribution Handling Starts with Payroll

Even with the correct plan design, execution depends on payroll. “If you are running payroll, you have to know whether you have Roth or not,” Katherine explains. “Because you have to take out the contributions based on whether it is regular 401(k) or Roth.” This is where eligibility, classification, and contribution type all come together.

Errors Lead to Correction Programs

If contributions are processed incorrectly, the fix is not simple. Employers may need to go through formal correction programs, which can be time-consuming and operationally disruptive. Getting it right at the payroll level is significantly easier than correcting it later.

Misconceptions About Roth in 401(k) Plans

Roth Is a Feature, Not a Separate Plan

A common misconception is that adding Roth creates a new plan structure. In reality, Roth is simply an added feature within an existing 401(k) plan. It does not require a full redesign, only an adjustment to how contributions are handled.

Avoiding Roth Creates More Complexity

Some employers hesitate to add Roth because they assume it will make administration more difficult. In practice, removing that option reduces flexibility and increases the likelihood of compliance issues, especially under the new catch-up rules.

Payroll and Vendor Readiness

The Industry Is Still Adapting

Payroll providers and recordkeepers are still working through how to operationalize these requirements. “Payroll companies are playing catch-up,” Katherine notes, which makes early coordination essential. Employers should not assume their vendors are fully prepared without confirming directly.

Data Coordination Is Critical

Recordkeepers rely on payroll data to determine eligibility and contribution type. Without accurate data flow between systems, even well-designed plans can run into execution issues.

Setting the Plan Up for Success

The most effective approach is to ensure the plan includes the features needed to handle these rules before they become a problem. A plan that includes both Roth and catch-up provisions gives employers more control, reduces the likelihood of errors, and allows for smoother administration as requirements evolve.

Moving Forward with a More Connected Plan Strategy

The Roth catch-up rule reflects a broader shift in retirement plan management toward greater coordination across systems and stakeholders. Employers are increasingly relying on partners who can translate regulatory changes into real-world execution across payroll, recordkeeping, and plan design. “You need to know what your payroll vendor and your recordkeeper are doing,” Christopher emphasizes. As requirements continue to evolve, organizations that prioritize alignment, data visibility, and proactive oversight will be better positioned to manage complexity and maintain compliance.