Will Plan Sponsors Need New Catch-Up Deferrals for High Earners in 2026?

Q: Currently, though we have Roth deferrals available, none of our employees who utilize catch-up elections currently utilize Roth for any deferrals. Since our salary deferral elections remain in effect until revoked, I am concerned that our deferral elections will be out of compliance for those with FICA wages exceeding $145,000 when the mandatory Roth catch-up provision takes effect next year. Will I need to obtain new salary deferral elections?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Fortunately, the IRS addressed this issue recently in proposed regulations issued on January 10. The proposed regulations specifically permit plan administrators and employers to deem any catch-up contributions made by those earning more than $145,000 in FICA wages as Roth contributions in 2026 (this is the “deemed Roth catch-up election”). No special salary deferral or other election is required. This is excellent news from an administrative perspective, as it is always a difficult task to have to chase down participants to complete election forms.

However, it is important to note that the deemed Roth catch-up election is conditioned on the participant having an “effective opportunity” to make a new election that is different than the deemed election. For example, the participant would need to have the opportunity to cease making additional elective deferrals. It is also important to note that the deemed Roth catch-up election only officially applies to 401(k) and 403(b) plans under the proposed regulations, although it is widely assumed that the same rule applies to 457(b) plans.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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