The Secure Act 2.0 was signed into law on December 29, 2022 and included significant changes to “qualified retirement plans” as well as SIMPLE IRA plans, with provisions becoming effective at various times during years 2023 through 2026. The purpose of this PayDay is to summarize provisions which employers (and also employees) should be aware of for both this year/2025 as well as 2026. You may also want to visit our blog to review the Secure Act 2.0 PayDay’s we authored on May 4, 2023, December 10, 2024 as well as most recently on September 22, 2025. IT IS IMPORTANT THAT EMPLOYERS BE AWARE OF THESE CHANGES SO THEY CAN COMPLY WITH THEM, AND EMPLOYEES NEED TO UNDERSTAND THEIR OPTIONS IN TAKING MAXIMUM ADVANTAGE OF THEIR 401K/403B/457 AND SIMPLE IRA PLANS FOR TIME REMAINING THIS YEAR AND FOR PLANNING IN 2026.
THE HEADLINE NEWS—-ROTH MANDATE FOR CATCH-UP CONTRIBUTIONS FOR HIGHER WAGE EARNER EMPLOYEES OVER $145K —WHEN DOES IT START?
The IRS released their “final regulations” mid-September of this year about a Secure Act 2.0 provision which requires employees of 401k/403b plans (does not apply to either 457 government plans or SIMPLE IRA plans) who had “wages subject to FICA tax” above $145,000 in the previous year to fund any “age 50+ catch-up contributions” for 2026 and later years in Roth after-tax dollars. This provision is generally seen as a current year “tax revenue generator” since Roth contributions are not tax-deductible/pre-tax but instead are tax-free when they are later taken out during retirement years. However, as most people know, the earnings/investment income earned on Roth retirement accounts is never taxed for either income or payroll taxes—–so Roth funding of retirement accounts is very popular with financial planners.
The IRS “final rules” as to implementation of the Roth mandate indicates that this provision still applies for year 2026, BUT can be delayed until 2027 IF the employer can not update their systems to implement this mandate in 2026. We do not expect any enforcement action by the IRS as to the Roth mandate until year 2027. However, many to most of the plan TPA’s and recordkeepers will likely suggest that their employer-clients implement the Roth mandate in January of 2026 as a conservative approach to interpreting the IRS “final rules” issued in September of this year.
CONCLUSION OF THIS MATTER—-Unless an employer is highly motivated to postpone the Roth high-income employee catch-up mandate until 2027, we suggest that employers plan on requiring their 2025 higher-wage employees who are 50+ during 2026 to fund their catch-up contributions in an after-tax Roth manner. EMPLOYERS SHOULD IDENTIFY WHICH OF THEIR EMPLOYEES ARE SUBJECT TO THE ROTH CATCH-UP MANDATE, WHICH ARE THOSE EMPLOYEES WHO EARNED OVER $145,000 IN WAGES SUBJECT TO FICA (W-2 box 3 wages), AND MONITOR THEIR 401K/403B FUNDING TO COMPLY WITH THE ROTH CATCH-UP MANDATE IN 2026.
MAKE SURE YOUR PLAN PERMITS ROTH FUNDING IF YOU WANT HIGHER INCOME EMPLOYEES TO CONTRIBUTE 2026 CATCH-UP CONTRIBUTIONS
If your 401k/403b plan does not permit employees to contribute in an after-tax Roth manner, those age 50+ employees with above $145,000 in 2025 FICA wages will not be able to fund catch-up contributions since they can only be made in an after-tax Roth manner. If the employer plan does not permit Roth funding (most plans do permit Roths, but you should check!), those higher income employees will not be able to make catch-up contributions at all.
CONSIDER AMENDING YOUR SIMPLE IRA PLAN TO PERMIT EMPLOYEES TO CONTRIBUTE TO ROTH ACCOUNTS
The Secure Act 2.0 permitted employees in SIMPLE IRA plans to contribute to their SIMPLE IRA accounts in a Roth after-tax manner, starting in 2023. Many of the retirement plan sponsors of SIMPLE IRA plans did not permit/offer SIMPLE IRA Roth funding until well beyond 2023, even though the tax law permitted Roth funding—-American Funds/Capitol Group offered Roth SIMPLE IRA plans in 2025, with Charles Schwab permitting Roth SIMPLE’s for the first time in January of 2026. If you offer a SIMPLE IRA plan and would like to permit Roth funding by employees, make sure your plan permits Roth funding. Many plans are being amended to accommodate Roth funding—–check on the status of your SIMPLE IRA plan!
INCREASED CATCH-UP AMOUNTS FOR EMPLOYEES AGE 60-63 DURING 2025 AND FUTURE YEARS
The Secure Act 2.0 added new “enhanced” catch-up contribution amounts for employees age 60-63, effective for years starting in 2025. The “super catch-up” amount for an employee age 60-63 is $11,250 for year 2025 (regular catch-up amount for 2025 is $7,500) in a 401k/403b plan, and is $5,250, or 50% higher than the regular $3,500 catch-up amount, for employees funding SIMPLE IRA plan accounts. YOU MAY WISH TO COMMUNICATE THESE SUPER CATCH-UP AMOUNTS FOR 2025 TO YOUR EMPLOYEES AGE 60-63 FOR THIS YEAR. The purpose of these “super catch-ups” is obvious—-permitting those ages 60-63 yet greater funding amounts for their retirement. Employees age 64+ can only fund catch-ups at the age 50+ amounts, not the extra 50% amounts permitted for the age 60-63 employee population.
INCREASED SIMPLE IRA FUNDING AMOUNTS FOR EMPLOYEES WHOSE EMPLOYER HAS 25 OR FEWER EMPLOYEES
The Secure Act 2.0 permits increased funding of SIMPLE IRA accounts for those employees who work for employers with 25 or fewer employees. This small employer relief provision permits employees of “smaller employers” to contribute $17,600 in regular SIMPLE IRA funding in lieu of the “normal cap” of $16,500, with the age 50+ regular catch-up SIMPLE funding increased by 10% to $3,850 instead of the below 50 regular catch-up amount of $3,500. The “super catch-up” in 2025 for employees of “small employers” who are ages 60-63 remains at $5,250 and as such is not increased as is the “regular” age 50 catch-up.
MAXIMUM EMPLOYEE FUNDING AMOUNTS DURING 2025 WITH PROJECTED FUNDING AMOUNTS FOR YEAR 2026
Since the law is confusing as to how much employees can electively defer/contribute to 401k/403b/457/SIMPLE IRA plans during 2025 and next year 2026, below are the 2025 maximum funding levels at different employee ages, by plan type, for 2025, with projections of the same amounts for year 2026 (the IRS updates the below figures each year based on inflation, with the 2026 figures being released anytime but not yet).
| 401(k)/403(b)/457 PLAN/AGE | 2025 | PROJECTED 2026 |
| 401k/403b/457 retirement plans—-any age | $23,500 | $24,500 |
| Age 50+ “catch-up contribution (also ages 64+) | $7,500 | $8,000 |
| Age 60-63 “super catch-up contribution” | $11,250 | $12,000—–NOTE–the super catch-up replaces the age 50 catch-up amount |
| SIMPLE IRA OVER 25 EE’s | 2025 | PROJECTED FOR 2026 |
| Regular contribution to SIMPLE IRA plans—pre-tax or Roth | $16,500 | $17,000 |
| Age 50+ catch-up to SIMPLE (also ages 64+) | $3,500 | $4,000 |
| Age 60-63 “super catch-up contribution” | $5,250 | $5,250 |
| SIMPLE IRA LESS THAN 25 EE’S | 2025 | PROJECTED FOR 2026 |
| Regular contributions, pre-tax or Roth | $17,600 | $18,500 |
| Age 50+ catch-up to SIMPLE (also ages 64+) | $3,850 | $4,000 |
| Age 60-63 “super catch-up contribution” | $5,250 | $5,250 |
NOTE—-The IRS will soon release the actual 2026 contribution amounts—–figures above for 2026 are projected based on how the IRS adjusts figures annually
BOTTOM LINE FOR EMPLOYERS WHO SPONSOR QUALIFIED RETIREMENT PLANS/SIMPLE IRA PLANS
The Secure Act 2.0 has made significant changes to 401k/403b/457 and SIMPLE IRA plans—-AS SUCH, TAKE THE FOLLOWING ACTION STEPS NOW:
- Review your existing plan for possible amendments and discuss with your plan consultant/TPA for compliance with Secure Act 2.0—-If your plan includes enrollment of new hires, identify employees whose automatic enrollment elective deferrals will increase in 2026 due to escalation clauses.
- You may wish to notify your employees as to their available contribution amounts for years 2025 and projected for 2026
- Identify which of your employees will be subject to the Roth catch-up mandate for 2026 (the mandate is based on FICA wages for year 2025)—notify them
- Make sure your payroll administrator/company is aware of any plan amendments or decisions so they can comply in payroll
INTEGRATION BETWEEN YOUR RETIREMENT PLANS (excluding SIMPLE) AND PAYROLL—–AUTOMATE THE COMPLIANCE!!
Retirement plans have become increasingly complex in the past few years, especially due to Secure Act 2.0 provisions. Plans implemented after 12/29/2022 (date of enactment of Secure Act 2.0) are REQUIRED to contain automatic enrollment features for “new employee hires,” which makes plan administration and integration with payroll much more complex. Many plans not mandated for automatic enrollment are being revised to include automatic enrollment features since automatic enrollment increases the contributions by “non-highly compensated employees,” helping increase the plan funding amounts for owners/highly compensated employees. Some plans are designed such that a new hire contributes, automatically, to their 401k/403b plan on their very first paycheck—-meaning that payroll needs to receive details of new hire plan enrollments from the plan provider immediately to stay in compliance.
ACCUPAY USES A 3RD PARTY DATA INTEGRATOR TO AUTOMATE/SYNC EMPLOYEE FUNDING WITH EMPLOYEE AFFIRMATIVE ENROLLMENTS OR AUTOMATIC ENROLLMENTS. Please contact your payroll specialist to discuss how we sync/map your 401k/403b/457 retirement plan between “payroll” and “plan enrollments.” We use PayKonnect as the 3rd party data integrator, which does enable us to map out the work flows between AccuPay’s payroll system and your specific retirement plan recordkeeper (PayKonnect is “impartial” as to the plan provider—-Empower, Fidelity, Voya, 401kGO, Principal, and many other plan recordkeepers). Reach out to AccuPay at 317-885-7600 for more information or contact data@accupay.com.
This PayDay is for educational purposes only and does not constitute tax and/or legal advice. Any links to external resources are for educational purposes only. AccuPay is not affiliated with nor receives any renumeration from any outside sources. Please consult with your tax and/or legal advisor before applying any suggestions made here or through external links.