With final regulations issued by the IRS addressing the Securing a Strong Retirement Act of 2022 (SECURE 2.0) provisions for retirement plan catch-up contributions, now is an ideal time to ensure your payroll system is set up to support these changes. The final regulations go into effect Nov. 17, 2025, although they generally apply to contributions in taxable years beginning after Dec. 31, 2026.
Learn more about these changes and how to ensure your payroll system is optimized for success.
Increased Catch-Up Limit
The final IRS rules confirm that retirement plans can offer higher catch-up contribution limits to participants aged 60 to 63 without violating fairness rules, meaning it’s okay if others have lower limits. However, if an employer chooses to offer this increased limit, all retirement plans within the same company group must do the same. The rules also explain how this works for SIMPLE retirement plans. Plans can apply this automatically but must be able to identify eligible employees and adjust contributions accordingly, even when corrected W-2s or income changes occur.
Mandatory Roth Treatment
For employees who earned more than $150,000 in the previous year, catch-up contributions must be made as Roth (after-tax) contributions. Plans can treat these contributions as Roth automatically, even without a formal election from the employee. If an employee’s income drops below the threshold or a corrected W-2 shows they are no longer subject to the Roth rule, the plan can continue treating their catch-up contributions as Roth for a short, “reasonable” time. These contributions don’t need to be changed back.
If a mistake occurs, such as a catch-up contribution being made on a pre-tax basis when Roth treatment was required, the plan can correct it. This is done by either transferring the contribution to a Roth account and updating the participant’s Form W-2, or by executing an in-plan Roth rollover and reporting the transaction on Form 1099-R. While plans are not required to use the same correction method for every participant, they must apply a consistent approach for individuals in similar circumstances. Importantly, no correction is necessary unless the total amount of erroneous pre-tax catch-up contributions exceeds $250.
Impact on Payroll
These changes aren’t just regulatory, they’re operational. Employers must now ensure that their payroll systems are equipped to handle a new level of complexity. That means being able to seamlessly transmit income data to retirement plan providers, automatically apply Roth treatment based on prior-year earnings, support consistent correction methods across similarly situated employees and avoid contribution errors that could trigger compliance issues or employee frustration. Our platform is built for this. By integrating directly with leading 401(k) administrators, we eliminate manual data handoffs, reduce the risk of costly errors and accelerate everything from plan deposits to year-end compliance. In a landscape where a missed Roth designation could mean a missed contribution, seamless payroll integration is essential. Contact us to learn more.
