Set It Up Now or Fix It Later: How Employers Should Prepare for Roth Catch-Up

Retirement plan design is entering a new phase of complexity. With changes introduced under SECURE 2.0, employers, especially multi-entity organizations, need to rethink how their plans are structured, administered, and supported.

The Roth catch-up requirement for higher earners brings new operational demands across payroll, plan documents, and recordkeeping. Employers that address these changes early will be in a stronger position to manage compliance and maintain flexibility as rules continue to evolve.

What Changed Under SECURE 2.0

Roth Catch-Up Requirements for High Earners

Employees age 50 and older who earn more than $145,000 are now required to make catch-up contributions as Roth contributions. These contributions are made on an after-tax basis, which shifts how payroll systems classify and process them.

As Katherine Tipper explains, “Anyone earning more than $145,000… needs to make those catch-up contributions as Roth deferrals, meaning taxes are taken out before it hits their 401(k) account.”

This change reaches beyond the individual participant. It affects how plans are designed, how contributions are tracked, and how systems communicate with each other.

Why This Impacts Employers Operationally

The update introduces new coordination requirements between payroll providers, recordkeepers, and plan administrators. When these systems are not aligned, the impact shows up quickly in the form of failed compliance testing, participant refunds, and limited correction options.

Katherine Tipper highlights the downstream effect clearly: “Lots of refunds and limited amount of stuff you can do in terms of testing.”

This is where many employers begin to feel the strain. The complexity is not in understanding the rule itself, but in executing it correctly across multiple systems.

Plan Design: Building Flexibility Into the Structure

The Importance of Roth Capabilities

Adding Roth functionality to a retirement plan creates a level of flexibility that is becoming increasingly important. Even if participation is limited today, having the structure in place allows employers to adapt as contribution rules continue to shift.

“Definitely get Roth in your plan,” Katherine notes. “Just have the flexibility, have it there.”

Without this capability, employers may find themselves constrained when higher earners need to comply with Roth requirements tied to catch-up contributions.

Why Catch-Up Contributions Matter in the Plan Document

Not every plan currently includes catch-up provisions, and that gap can create limitations. Catch-up contributions offer additional flexibility for both participants and employers, particularly when navigating testing and contribution limits.

Katherine emphasizes the structural importance: “From having catch-up in your document is very useful from a flexibility standpoint.”

Including these provisions in the plan document ensures that employers retain more control over how contributions are structured and managed as regulations evolve.

Proactive Planning vs. Last-Minute Adjustments

Where Employers Run Into Trouble

Employers that delay reviewing their plan structure often encounter issues when deadlines approach. At that point, changes need to be made quickly, and systems may not be ready to support them.

This can lead to administrative strain, increased costs, and a more complicated experience for employees.

What a Proactive Approach Looks Like

Employers who take a proactive approach begin by reviewing their plan documents and confirming that both Roth and catch-up provisions are in place. They also engage payroll providers early to understand whether systems are prepared to handle new contribution classifications.

“There’s the setup for all employers of having those things in it,” Katherine explains, “so you are in good shape versus proactive versus reactive.”

This type of preparation reduces friction and allows for a more controlled rollout of required changes.

Payroll and Recordkeeping: Where Execution Matters Most

The Expanding Role of Payroll

Payroll systems are now central to retirement plan execution. The ability to correctly distinguish between pre-tax and Roth catch-up contributions is essential for compliance.

Katherine points out that many providers are still catching up: “A lot of them don’t have it solved just yet.”

That gap makes it critical for employers to understand where their vendor stands and whether additional support may be needed.

The Need for Strong System Alignment

Execution depends on how well payroll systems and recordkeepers communicate. When those systems are aligned, contributions flow correctly, accounts are updated accurately, and compliance risks are minimized.

Katherine frames the reality directly: “If you don’t have those things, you are fighting against the tide.”

When alignment is missing, errors can build quickly, and corrections become more complex over time.

The Impact of Misalignment

What Employers Experience When Systems Fall Short

When plan design, payroll, and recordkeeping are not working together, the result is often a series of compounding issues. Contributions may be misclassified, compliance testing may fail, and participants may need to receive refunds.

These situations are difficult to unwind and often require additional time and resources to resolve.

A Higher Standard for Vendors

The current environment places greater expectations on service providers. Payroll vendors, recordkeepers, and advisors all play a role in ensuring that plans operate smoothly under new rules.

As Katherine puts it, “This really steps up the need for payroll vendors to play their A game.”

Employers benefit from working with partners who can support both the strategic and operational sides of plan management.

Moving Forward with a More Connected Plan Strategy

Retirement plan management is becoming more integrated, and the expectations around coordination, data, and execution continue to rise. Success now depends on how well payroll providers, recordkeepers, and plan consultants operate as a connected system rather than as separate functions.

This shift is driving a broader evolution in the role of the Retirement Plan Consultant. Employers are no longer just looking for plan administration. They need guidance that brings together strategy, compliance, and real-time execution across every moving part of the plan.

“Access to the right data is everything,” says Katherine Tipper. “We are stronger, faster, and more flexible together.”

That is the direction the industry is moving toward. A more collaborative, data-driven model where independent expertise is strengthened through shared insight, stronger technology alignment, and coordinated execution across the ecosystem.

For employers, this means working with partners who can not only design the right plan structure, but also ensure it functions seamlessly in practice. Alignment across vendors, access to better data, and proactive oversight are becoming essential to maintaining compliance and supporting long-term outcomes.

As the retirement landscape continues to expand, the advantage will belong to organizations that are connected, coordinated, and built to move forward together.