Benefits Monthly Minute
The September Monthly Minute digs into the new final regulations that address SECURE 2.0’s Roth catch-up contribution rules.
On September 15, 2025, the IRS released final regulations addressing various SECURE 2.0 catch-up contribution provisions. These final regulations focus not only on requirements for higher-income employees to make after-tax Roth catch-up contributions but also provide procedures for plan administrators to follow when implementing the new Roth catch-up rules. In general, the new final regulations include:
- Aggregation Rules: With respect to each catch-up eligible participant who is subject to the Roth catch-up requirement, the term “employer sponsoring the plan” refers to the participant's common law employer contributing to the plan. However:
- If the common law employer is a member of a controlled group of employers, the plan may provide that the employee's common law employer is aggregated with one or more other employers in the group and treat the aggregated employers as a single employer.
- If the common law employer uses a common paymaster, the plan may provide that the employee's common law employer is aggregated with one or more other employers using that common paymaster and treat the aggregated employers as a single employer.
- Successor Employer Rules: In some circumstances, the rules permit aggregation by a successor employer of wages received by a participant in the prior year from predecessor employers in determining whether the participant is subject to the Roth catch-up requirement.
- Dual-Qualified Plan Transition Relief: The new rules provide transition relief for dual-qualified plans that cover participants in Puerto Rico such that Roth catch-up requirements are treated as satisfied for a taxable year if that taxable year begins before the Puerto Rico Code is amended to provide for designated Roth contributions.
- Deemed Roth Election Procedures: The regulations set forth administrative requirements for deemed Roth elections. Notably, the application of a deemed Roth catch-up election to a participant is conditioned on the participant having an “effective opportunity” (considering all facts and circumstances) to make a different election. Also, the deemed election ceases to apply within a reasonable period of time following the date on which:
- the employee ceases to be subject to the requirement to make any catch-up contributions as designated Roth contributions, or
- an amended Form W-2 is filed or furnished to the employee indicating that the employee is not subject to the requirement.
Accordingly, catch-up contributions that were designated as Roth under the deemed election before the end of such “reasonable period” do not need to be recharacterized as pre-tax catch-up contributions.
- Correction Procedures: Correction procedures for Roth catch-up failures include the following --
- Form W-2 Correction Method: a plan that provides for deemed Roth elections may correct a participant's pre-tax catch-up contribution that was required to be a designated Roth contribution by transferring the elective deferral (adjusted for gain or loss) from the participant's pre-tax account to the participant's designated Roth account and reporting the contribution (unadjusted) as a designated Roth contribution on the Form W-2 for the year of the deferral. Essentially, the contribution is reported as if it had been correctly made.
- In-Plan Roth Rollover Correction Method: under this correction method, a plan that provides for deemed Roth elections would directly roll over the elective deferral (adjusted for gain or loss) from the participant's pre-tax account to the participant's designated Roth account and report the amount of the in-plan Roth rollover on Form 1099-R. The amount directly rolled over to the participant's designated Roth account would be the same as the amount reported on Form 1099-R, and the contribution (adjusted for gain or loss) would be includible in the participant's gross income for the year of the rollover. Note that an in-plan Roth rollover correction is permitted to be made only by a plan and may not be elected voluntarily by a participant. Furthermore, a plan may provide for the use of the in-plan Roth rollover correction method even if it does not permit participants to elect in-plan Roth rollovers.
- Correction Exemptions: correction is not required if: 1. the amount of the pre-tax elective deferral that was required to be a designated Roth contribution does not exceed $250; or 2. the participant became subject to the new Roth catch-up rules solely because the participant’s FICA wages exceeded the applicable threshold ($145,000) due to adjustments made after the correction deadline.
KMK Comment: The final regulations relating to Roth catch-up contributions generally apply with respect to contributions in taxable years beginning on or after January 1, 2027 (later applicability dates apply for governmental and union plans, and note that the final regulations do not extend the statutory Roth catch-up requirement which applies to taxable years on or after January 1, 2026). Plans are also permitted to implement the final regulations before 2027 consistent with a reasonable, good faith interpretation. Considering that catch-up contributions are commonly included as a component of defined contribution plans, these final regulations should be carefully reviewed with plan counsel and service providers to ensure compliance. Plan amendments are generally required by December 31, 2026, and participant communications should be carefully drafted to reflect plan administration as well.
The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.
Lisa Wintersheimer Michel
513.579.6462
lmichel@kmklaw.com
John F. Meisenhelder
513.579.6914
jmeisenhelder@kmklaw.com
Antoinette L. Schindel
513.579.6473
aschindel@kmklaw.com
Kelly E. MacDonald
513.579.6409
kmacdonald@kmklaw.com
Rachel M. Pappenfus
513.579.6492
rpappenfus@kmklaw.com
KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.
