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The SECURE 2.0 Act introduced significant changes to retirement plans. One of the more controversial ones concerns the tax treatment of catch-up contributions for higher-paid employees. Starting January 1, 2026, individuals aged 50 and over who earned more than $145,000 in the preceding year (“higher paid” participants) will be required to make their catch-up contributions as Roth contributions, meaning that they won’t be able to get deductions for those deferrals (but will receive the distributions tax-free at retirement). The compensation threshold is subject to annual adjustments for inflation.
While the change is effective in 2026, the work to prepare for the change must be done in 2025. As a result, financial professionals and plan sponsors should start to prepare now.
The views expressed here are those of Fred Reish. They should not be construed as investment advice or as the views of Hartford Funds or the employees of Hartford Funds. They are based on available information and are subject to change without notice. The information above is intended as general information and is not intended to provide, nor may it be construed as providing, tax, accounting or legal advice. As with all matters of a tax or legal nature, please consult with your tax or legal counsel for advice. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Fred Reish.
MFDC095_0525 4472920
JD, Partner, Faegre Drinker
Fred Reish is an ERISA attorney whose practice focuses on fiduciary responsibility, retirement income, and plan operational issues. He has been recognized as one of the “legends” of the retirement industry by both PLANADVISER magazine and PLANSPONSOR magazine.