As we head into 2026, employers and employees alike should take note of important upcoming changes to retirement savings rules. The IRS has announced another increase to 401(k) contribution limits — giving workers more opportunity to save — but there’s also a new twist for higher earners. Beginning in 2026, a provision of the SECURE 2.0 Act will require certain employees age 50 and older to make their 401(k) catch-up contributions as Roth (after-tax) contributions if their income exceeds $145,000. Understanding how this rule works, who it affects, and how to plan ahead can help both individuals and businesses stay compliant and make the most of their retirement savings opportunities.
2026 401(k) Contribution Limits and the New $145,000 Roth Catch-Up Rule Explained
The IRS 401(k) contribution limits are increasing again in 2026 — and there’s also a new rule that could change how older workers make their catch-up contributions.
Under the SECURE 2.0 Act, starting in 2026, certain high-income employees age 50 or older will be required to make their 401(k) catch-up contributions as Roth (after-tax) contributions rather than pre-tax. Here’s what that means, who it affects, and how to prepare.
Who the new 401(k) Roth catch-up rule affects
If you’re age 50 or older and earned more than $145,000 in W-2 wages in 2025, your 401(k) catch-up contributions in 2026 will have to be Roth contributions.
If your 2025 W-2 wages were $145,000 or less, you can still choose whether to make your catch-up contributions pre-tax or Roth, depending on what your plan allows.
This rule was originally supposed to start in 2024 but was delayed until 2026 to give employers and plan administrators time to adjust.
How the $145,000 income threshold is calculated
The income test uses Medicare wages, not taxable wages.
That means the IRS looks at Box 5 of your W-2, not Box 1. Pre-tax deductions like 401(k) deferrals and Section 125 cafeteria plans reduce Box 1 but not Box 5.
As a result, it’s possible to have $142,000 in taxable wages (Box 1) but $150,000 in Medicare wages (Box 5) — which would make you subject to the new Roth catch-up requirement.
2026 401(k) contribution limits (projected)
For 2026, the projected IRS 401(k) limits are:
- Regular 401(k) contribution limit: $24,500
- Catch-up contribution limit (age 50+): $8,000
- Total potential contribution: $32,500
If your 2025 Medicare wages (Box 5) are below $145,000, you can make the full $32,500 as pre-tax contributions if you choose.
If they’re above that threshold, the $8,000 catch-up portion must go into the Roth 401(k) side of your plan.
Special note for S-Corp owners and small business clients
For S-Corp owners, only W-2 wages count toward the $145,000 limit. Your K-1 income or shareholder distributions are not included.
That means if you want to stay below the threshold, you can adjust your 2025 W-2 salary before the end of the year. Many small business owners will want to review this with their payroll provider before year-end to make sure they maintain flexibility for 2026.
What employers and employees should do now
- Confirm your 401(k) plan offers a Roth option. Some older plans still don’t — and they’ll need to add one before 2026.
- Review your expected 2025 Medicare wages (Box 5). This will determine whether the rule applies to you next year.
- Plan your salary and contributions accordingly. Adjust your W-2 pay if you’re close to the $145,000 mark.
- Coordinate with your payroll provider. Systems must be updated to route catch-up contributions correctly starting in 2026.
The bottom line
This isn’t a new tax — it’s simply a change in where certain contributions are directed.
For most employees, nothing will change. But if you’re over 50 and your 2025 W-2 wages are above $145,000, you’ll need to make your 2026 catch-up contributions as Roth (after-tax) contributions.
CRI Payroll Services can help you navigate these upcoming 401(k) changes, review your plan setup, and ensure your payroll system is ready for 2026.
Contact CRI Payroll Services today at www.cripayroll.com for assistance with payroll, HR, and retirement plan compliance.
The 2026 401(k) updates bring both new opportunities and new responsibilities for employers and employees. While higher contribution limits are good news for retirement savers, the new Roth catch-up requirement means that high-income earners and plan sponsors need to plan ahead. Reviewing your payroll setup, confirming your plan’s Roth option, and coordinating with your provider before year-end can help prevent surprises when the rule takes effect. CRI Payroll Services is here to guide you through these changes and ensure your payroll and retirement plan stay compliant and optimized for the year ahead.