A new 401(k) rule is changing how some older high earners can make retirement contributions in 2026.
Workers who are at least 50 and had more than $150,000 in FICA wages from their employer in 2025 generally have to make their 2026 catch-up contributions as Roth contributions rather than pre-tax contributions.
The rule does not turn the entire 401(k) contribution into Roth. It applies only to the catch-up portion above the regular annual contribution limit. See also: Leaving the US? What Happens to Your 401(k) When You Move Abroad?.
For people in their peak earning years, that changes when taxes are paid on part of their retirement savings.
The rule is now in effect
The change comes from Section 603 of the SECURE 2.0 Act and is codified under Section 414(v)(7) of the tax code.
The rule was originally scheduled to begin earlier, but the IRS gave employers additional time to prepare. The 2026 tax year is the first year in which the Roth catch-up requirement applies.
Treasury and the IRS issued final regulations in September 2025. The regulations became effective on November 17, 2025, although their general applicability date is for contributions made after December 31, 2026. For 2026, the IRS allows plans to use a reasonable, good-faith interpretation of the statutory requirement.
The practical result is straightforward: the Roth catch-up rule applies in 2026.
The IRS also confirmed a $150,000 wage threshold for 2026, replacing the $145,000 amount originally written into the legislation.
The $150,000 threshold is not based on total income
The $150,000 figure is more specific than it first appears.
It is not household income, adjusted gross income or taxable income.
For 2026, the test generally uses an employee’s 2025 FICA wages from the employer sponsoring the retirement plan.
That employer-specific calculation can produce some unusual results.
For example, an employee who earned $180,000 from one employer in 2025 would generally cross the threshold for that employer’s plan.
Another employee could earn $100,000 from one employer and $100,000 from another. Despite having $200,000 in combined wages, that employee would not automatically cross the threshold for either employer’s plan.
The calculation is generally made separately for each employer.
Only the catch-up contribution is affected
The regular 401(k) contribution limit remains unchanged by this rule.
For 2026, employees can contribute up to $24,500 through regular elective deferrals.
Workers age 50 and older can generally contribute an additional $8,000 as a catch-up contribution, bringing the potential total to $32,500.
Workers aged 60 through 63 have a higher catch-up limit of $11,250.
Consider a 55-year-old employee earning $180,000.
The potential contribution could look like this:
- $24,500 regular 401(k) contribution
- $8,000 catch-up contribution
- $32,500 total
For an employee subject to the new rule, the $24,500 regular contribution does not automatically have to be Roth.
The additional $8,000 catch-up contribution does.
That means part of the retirement contribution can still receive the normal pre-tax treatment, while the catch-up portion is made with after-tax Roth money.
What happens if the plan has no Roth option?
This is one of the most important practical details.
An affected employee cannot simply continue making the catch-up contribution as pre-tax money if the plan does not offer a Roth option.
The retirement plan needs a mechanism for making the required catch-up contribution as a designated Roth contribution.
If there is no Roth option, affected employees may not be able to make catch-up contributions under the plan.
That makes the employer’s plan rules important for anyone approaching the annual contribution limit.
The final regulations also allow certain plans to automatically treat catch-up contributions as Roth contributions when the employee is subject to the requirement.
Changing jobs can change the result
The employer-specific wage test also matters when someone changes jobs.
Consider an employee who earned $140,000 from Employer A and $170,000 from Employer B during 2025.
The combined wages were $310,000. But the Roth catch-up test is not simply based on that combined figure.
The relevant wages are generally those paid by the employer sponsoring the retirement plan.
The employee’s 2025 W-2 wages from that employer therefore become important when determining whether the Roth requirement applies in 2026.
Immigration status does not change the rule
The 401(k) catch-up requirement does not have a separate rule for immigrants. See also: Trump Accounts Are Coming for Millions of Kids: What Immigrant Parents Need to Know.
A U.S. citizen, green card holder and H-1B worker participating in the same employer retirement plan are generally subject to the same contribution rules. See also: The proposed $103,265 H-1B fee: what it means for workers and applicants.
The relevant factors are age, qualifying wages and the terms of the retirement plan.
Immigration status by itself does not create an exemption from the Roth catch-up requirement.
The numbers for 2026
| Rule | 2026 amount |
|---|---|
| Wage threshold for Roth catch-up requirement | $150,000 |
| Regular 401(k) limit | $24,500 |
| Catch-up limit, age 50+ | $8,000 |
| Potential total, age 50+ | $32,500 |
| Catch-up limit, ages 60 to 63 | $11,250 |
| Roth catch-up rule begins | 2026 |
| Main plans affected | 401(k), 403(b), governmental 457(b) |
The IRS confirmed the $24,500 regular limit, $8,000 catch-up limit and $11,250 enhanced catch-up limit for 2026.
What happens next?
For employees who crossed the $150,000 threshold with their plan sponsor in 2025, the first step is checking the 2025 W-2 wages used for the calculation.
The next step is checking whether the employer’s retirement plan offers Roth contributions and how the plan handles catch-up contributions.
This is particularly relevant for workers nearing retirement. Catch-up contributions are designed to allow additional retirement savings during the years when earnings are often at their highest.
The new rule does not reduce the amount that can be saved. It changes the tax treatment of the catch-up portion.
For affected high earners, that means a larger share of retirement savings may now be taxed before it goes into the account rather than when the money is withdrawn later.
For immigrants working in the U.S., the same rule applies regardless of whether the worker holds citizenship, a green card or a temporary work visa.
Sources
- IRS, 2026 401(k) contribution limits
- IRS, final regulations on Roth catch-up contributions
- IRS, 2026 retirement plan contribution limits
- IRS, 2025-49 guidance on the $150,000 wage threshold
