Roth catch-up requirement for high wage earners
Quick Links
Resources
- Deemed Roth Catch-Up Election presentation slides 3/25/26
- Recording of Deemed Roth Catch-Up Presentation (coming soon)
Background
On December 29, 2022, President Biden signed into law the Consolidated Appropriations Act of 2023, which includes the package of retirement provisions referred to as “SECURE 2.0”. These provisions continue the themes and reforms that began with the 2019 SECURE Act, focusing on getting more participants into the retirement system, finding ways for them to accumulate more assets, and then ensuring they get connected with those assets when retirement comes.
Roth Requirement for High Wage Earners
Effective in 2026, a new retirement savings rule begins that may impact employees age 50 and older. Under Section 603 of the SECURE 2.0 Act, participants who are eligible for catch-up contributions and had more than $150,000 in FICA wages in the previous year are considered ‘high wage earners’ by the IRS and must have their catch-up contributions made as Roth (after tax) contributions. Catch-up contributions
are the extra amounts employees 50 or older can contribute beyond the standard
annual limit.
To implement this requirement, the Deferred Compensation Committee has approved the ‘deemed Roth’ method. This means that a participant who is identified as a high wage earner, age 50 or older, will have their contributions automatically moved to Roth after reaching the standard contribution limit of $24,500.
Did You Know…?
Contributing to a Roth account now can provide you with tax-free income in retirement? Pay the taxes on your contributions now and the earnings and growth in retirement (after a 5 year waiting period from date of first contribution) will be tax free!
