Key Insights

• 2026 Contribution Limits Are Rising Across All Major Plan Types
  Higher limits for 401(k)s, IRAs, and SIMPLE IRAs give employees more room to save—but require updated payroll systems and clear employee communication.

• Mandatory Roth Catch-Up Begins January 1, 2026
  High earners (those with prior-year FICA wages above $145,000) must make all catch-up contributions on a Roth basis, making Roth support a non-negotiable plan feature.

• Employers Must Act Now to Stay Compliant and Avoid Disruptions
  Plans without Roth functionality will be unable to accept catch-up contributions for affected employees. Early coordination with payroll and recordkeepers is essential to ensure a smooth transition.

The IRS has released updated retirement contribution limits for 2026, and HR teams should begin preparing now. Employee deferral limits have increased but there is a significant compliance change. The mandatory Roth catch-up requirement for high earners will directly affect payroll, plan design, and employee communication.

Key Contribution Changes for 2026

401(k), 403(b), and 457(b) Plans

• Employee deferral limit increases to $24,500.

• Standard catch-up contribution for age 50+: $8,000.

• Enhanced catch-up for ages 60–63 remains $11,250.

IRA Contributions

• Traditional and Roth IRA contribution limit rises to $7,500.

• IRA catch-up for age 50+: $1,100.

SIMPLE IRA Contributions

• SIMPLE IRA limit increases to $17,000.

• SIMPLE catch-up for age 50+: $4,000.

Mandatory Roth Catch-Up for High Earners (Effective January 1, 2026)

Starting in 2026, certain employees must make all catch-up contributions on a Roth (after-tax) basis.

Who Must Use Roth Catch-Up?

Employees who earned more than $145,000 in FICA wages in the prior year (inflation-adjusted annually).

What Plans Must Do

Plans that do not offer Roth deferrals will be prohibited from accepting catch-up contributions for affected employees.

Payroll and recordkeeping systems must be able to:

• Identify employees exceeding the FICA-wage threshold.

• Automatically route catch-up contributions as Roth.

• Apply correct tax-withholding rules.

Plan Design Implications

Plan sponsors must either:

1. Amend the plan to permit Roth contributions, or

2. Restrict catch-up eligibility to those earning below the FICA threshold.

Employee Impact

High-earning employees will owe taxes sooner since Roth contributions are after-tax. For example, an $8,000 Roth catch-up contribution may generate roughly $2,000 in additional current-year taxes for an employee in the 24% bracket.

Strategic Implications

These changes represent more than routine inflation updates—they reflect a policy shift toward expanding after-tax savings.

Organizations that prepare early will be better positioned to:

• Avoid compliance issues

• Strengthen employee trust

• Improve retirement plan engagement

• Demonstrate benefits leadership

Looking Ahead

With January 1, 2026 approaching quickly, employer teams should coordinate with payroll providers and recordkeepers now. Early action will ensure a seamless transition and reinforce benefits as a key recruitment and retention tool.

Sources

[1] Internal Revenue Service — “401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500.”
https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500

[2] Internal Revenue Service — “IRS announces 2026 401(k) contribution limits, raises savings cap.”
https://www.irs.gov/newsroom/irs-announces-2026-401k-contribution-limits-raises-savings-cap

[3] Internal Revenue Service — “IRS unveils 2026 IRA contribution limits, raises savings cap.”
https://www.irs.gov/newsroom/irs-unveils-2026-ira-contribution-limits-raises-savings-cap

[4] Navia Benefit Solutions — “Secure 2.0 and Roth Catch-Up Rules: Preparing for 2026.”
https://www.naviabenefits.com/secure-2-0-and-roth-catch-up-rules-preparing-for-2026/

[5] Quarles Law Firm — “SECURE 2.0 Act Retirement Plan Update: Roth Catch-Up Contributions in 2026.”
https://www.quarles.com/insights/secure-20-act-retirement-plan-update-roth-catch-up-contributions-in-2026/

[6] Internal Revenue Service — “Treasury, IRS issue final regulations on new Roth catch-up rule, other SECURE 2.0 Act provisions.”

https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-on-new-roth-catch-up-rule