As we mentioned in our last newsletter, beginning January 1, 2026, employees age 50 or older in 2026 who have total 2025 FICA wages (Box 3 of W-2) with the current employer in excess of $145,000 (indexed for future years), must have catch-up contributions taxed as a Roth contribution in order to remain within the qualified plan. On November 13, 2025, the IRS retroactively increased this to employees with FICA wages of $150,000. 

The implementation of the Roth catch-up requirement will require changes to your plan document, and changes by your payroll provider; specific changes will be determined based on whether your plan adopts a deemed Roth election or if your plan will require participants to make an affirmative Roth election to make catch-up contributions. 

To satisfy this new requirement, we will be adding the deemed Roth election to your plan document later in 2026. If you choose not to add the deemed Roth election, please contact your Client Service Manager (Team). 

Necessary steps to take: 

1. Contact your payroll provider to determine their ability to administer a deemed Roth election. This is crucial because if your payroll provider is unable to support the deemed Roth election, you will not be able to offer a deemed Roth election in your plans. In this case, please contact your Client Service Manager immediately. 
2. If your payroll provider can support the deemed Roth election, decide if you want to add the deemed Roth election to your plan. NOTE: Until or if we do not hear from you, your Plan will allow the deemed Roth election for catch-up contributions. Please contact your Client Service Manager (Team) to elect otherwise. 

We are adding deemed Roth election to plans with Roth contributions for ease of administration. 

• Employees who must make catch-up contributions on a Roth basis will have continued contributions to the plan. Once the participant meets the deferral contribution limit, additional contributions will continue to be made on a Roth basis.  

• The plan will have the ability to use two 2 correction methods if excess deferral contributions were made to the plan. If the excess is found prior to the Form W-2 issue date, the correction can be made on the W-2 ,otherwise the correction will be done on a Form 1099-R similar to an in-plan Roth rollover. 

• Employees can still elect Roth contributions for their catch-up contributions. 

If your plan currently has Roth contributions, the information below, may be included in your plan’s annual Safe Harbor and Automatic Enrollment Notice we prepare for your plan. You should inform any affected participants about this change. 

Effective January 1, 2026 if you earned more than $150,000 in FICA Wages in the prior year, you may only defer your Catch-up Contributions on a Roth basis, and in order to assist with meeting nondiscrimination testing requirements, pre-tax Elective Deferrals you make may be recharacterized as Roth Elective Deferrals.