"Under Section 603 of the SECURE 2.0 Act, those contributions must now be designated as Roth. The change is mandatory, not elective. Plan administrators are required to enforce it."
"The $145,000 threshold is based on prior-year Box 3 wages, not Box 5 or total compensation, so an employee who received a large bonus in 2025 but has lower base pay in 2026 could still be subject to the rule."
"Forced Roth treatment means catch-up contributions grow and are withdrawn tax-free. That structural advantage is most powerful when the underlying investments generate strong long-term compounding."
Beginning January 1, 2026, workers earning over $145,000 in FICA wages from the previous year will be required to make Roth-designated catch-up contributions to their 401(k) plans. This change, mandated by Section 603 of the SECURE 2.0 Act, is the first major alteration to catch-up contributions since 2001. The IRS will enforce this rule based on prior-year wages, not current income. This shift may benefit those expecting higher tax rates in retirement, while others may find it disadvantageous.
Read at 24/7 Wall St.
Unable to calculate read time
Collection
[
|
...
]