IRS Issues Final Regs on SECURE 2.0 Changes to Catch-Up Contributions

(Parker Tax Publishing September 2025)

The IRS issued final regulations addressing several SECURE 2.0 Act provisions relating to catch-up contributions (i.e., additional contributions under a 401(k) or similar workplace retirement plan for employees who are age 50 or older). The final regulations include final rules related to a SECURE 2.0 Act provision requiring that catch-up contributions made by certain higher-income participants be designated as after-tax Roth contributions. T.D. 10033.

Background

Code Sec. 414(v) permits a retirement plan to allow catch-up eligible participants to make additional elective deferrals that are catch-up contributions and sets forth requirements relating to those contributions. The rules for catch-up contributions were amended by Sections 106, 117, and 603 of the SECURE 2.0 Act of 2022, enacted as part of the Consolidated Appropriations Act, 2023 (Pub. L. 117-328).

For tax years beginning after December 31, 2024, Section 109 of the SECURE 2.0 Act amended Code Sec. 414(v)(2) to increase the applicable dollar catch-up limit for catch-up eligible participants who attain age 60, 61, 62, or 63 during the tax year. For such a participant in an applicable employer plan other than a SIMPLE plan, the increased applicable dollar catch-up limit is 150 percent of the otherwise applicable dollar catch-up limit in effect for 2024. For such a participant in a SIMPLE plan, the increased applicable dollar catch-up limit is 150 percent of the otherwise applicable dollar catch-up limit in effect for 2025. In either case, the increased applicable dollar catch-up limit is subject to adjustment for years after 2025 to reflect changes in the cost of living.

Section 117 of the SECURE 2.0 Act amended Code Sec. 414(v)(2) to increase the applicable dollar catch-up limit for SIMPLE plans sponsored by certain eligible employers who are described in Code Sec. 408(p)(2)(E)(iv). The increased applicable dollar catch-up limit is available automatically to a SIMPLE plan sponsored by an eligible employer that had no more than 25 employees who received at least $5,000 of compensation from the employer for the preceding calendar year. Other eligible employers may make an election for the increased applicable dollar catch-up limit to apply and, if the election is made, the employer must make additional matching or nonelective contributions. The increased applicable dollar catch-up limit, which applies to tax years beginning after December 31, 2023, is 110 percent of the otherwise applicable dollar catch-up limit under Code Sec. 414(v)(2)(B)(ii) for calendar year 2024. The increased applicable dollar catch-up limit is subject to adjustment for years after 2024 to reflect changes in the cost of living.

Section 603(a) of the SECURE 2.0 Act amended Code Sec. 414(v) to add Code Sec. 414(v)(7). Code Sec. 414(v)(7)(A) sets forth the requirement that catch-up contributions made by certain catch-up eligible participants must be designated Roth contributions (the Roth catch-up requirement). Specifically, for a participant whose FICA wages as defined in Code Sec. 3121(a) for the preceding calendar year from the employer sponsoring the plan exceeded $145,000, Code Sec. 414(v)(1) applies only if any catch-up contributions made by the participant are designated Roth contributions (as defined in Code Sec. 402A(c)(1)).

Code Sec. 414(v)(7)(B) provides that, in the case of an applicable employer plan with respect to which Code Sec. 414(v)(7)(A) applies to any participant for a plan year, Code Sec. 414(v)(1) does not apply to the plan unless the plan provides that any catch-up eligible participant may make catch-up contributions as designated Roth contributions. Code Sec. 414(v)(7)(C) provides that Code Sec. 414(v)(7)(A) does not apply to SEP arrangements or SIMPLE IRA plans. Under Code Sec. 414(v)(7)(D), the IRS may issue regulations providing that a catch-up eligible participant may elect to change the participant's election to make catch-up contributions if the participant's compensation is determined to exceed the wage limitation under Code Sec. 414(v)(7)(A) after the election is made. Under Code Sec. 414(v)(7)(E), for tax years beginning after December 31, 2024, the wage limitation is adjusted for changes in the cost of living (the wage limitation, as adjusted, is referred to as the Roth catch-up wage threshold).

In Notice 2023-62, the IRS clarified that applicable employer plans may, for tax years beginning after December 31, 2023, continue to permit catch-up eligible participants to make elective deferrals that exceed the applicable dollar amount under Code Sec. 402(g)(1)(B) (or deferrals that exceed the applicable dollar amount under Code Sec. 457(e)(15)) if those contributions in excess of the applicable dollar amount satisfy the requirements for catch-up contributions under Code Sec. 414(v). In addition, under Notice 2023-62, the first two tax years beginning after December 31, 2023, are regarded as an administrative transition period with respect to the Roth catch-up requirement. During the administrative transition period, catch-up contributions made by a participant who is subject to the Roth catch-up requirement will be treated as satisfying the requirements of Code Sec. 414(v)(7)(A), even if the contributions are not designated Roth contributions.

In REG-101268-24, published on January 13, 2025, the IRS issued proposed regulations under Code Secs. 401(k), 403(b), and 414(v) to reflect changes to the catch-up contribution requirements for certain catch-up participants pursuant to Sections 109, 117, and 603 of the SECURE 2.0 Act.

T.D. 10033

On September 16, 2025, the IRS published final regulations in T.D. 10033 that adopt the proposed regulations with certain changes in response to practitioners' comments.

Deemed Roth Catch-Up Contributions

In order to facilitate compliance with the Roth catch-up requirement under Code Sec. 414(v)(7)(A), Prop. Reg. Sec. 1.401(k)-1(f)(5)(iii) generally permitted a plan to provide, for tax years beginning after December 31, 2023, that a participant who is subject to the Roth catch-up requirement is deemed to have irrevocably designated any catch-up contributions as designated Roth contributions in accordance with the requirements of existing Reg. Sec. 1.401(k)-1(f)(1)(i). However, in accordance with Code Sec. 414(v)(7)(D), Prop. Reg. Sec. 1.401(k)-1(f)(5)(iv) provided that the application of a deemed Roth catch-up election to a participant would be conditioned on the participant having an effective opportunity to make a new election that is different than the deemed election.

The final regulations clarify the conditions set forth in Prop. Reg. 1.401(k)-1(f)(5)(iv) by providing that the deemed election described in Reg. Sec. 1.401(k)-1(f)(5)(iii) must cease to apply to an employee within a reasonable period of time following the date on which: (1) the employee ceases to be subject to the requirement under Code Sec. 414(v)(7) to make any catch-up contributions as designated Roth contributions, or (2) an amended Form W-2 is filed or furnished to the employee indicating that the employee is not subject to the requirement under Code Sec. 414(v)(7) to make any catch-up contributions as designated Roth contributions. Accordingly, catch-up contributions that were designated as Roth contributions pursuant to the deemed election before the end of the reasonable period of time referred to in the prior sentence do not need to be recharacterized as pre-tax catch-up contributions.

The final regulations retain the proposed rule that a plan may provide that an employee who is subject to the Roth catch-up requirement is deemed to have irrevocably designated any elective deferrals that are catch-up contributions as designated Roth contributions. The final regulations also retain the proposed rule in Prop. Reg. Sec. 1.414(v)-2(b)(1), which provides that an elective deferral that is treated as a catch-up contribution at the time of deferral (for example, an elective deferral that is a catch-up contribution because it exceeds the Code Sec. 401(a)(30) limit on elective deferrals) is required to be a designated Roth contribution only to the extent the participant has not previously made elective deferrals that are designated Roth contributions during the tax year equal to the applicable dollar catch-up limit under Reg. Sec. 1.414(v)-1(c)(2).

Increased Catch-Up Limit for Participants Age 60-63

Comment on the proposed regulations, a practitioner requested confirmation that catch-up eligible participants attaining age 60, 61, 62, or 63 who are eligible to make special Code Sec. 403(b) catch-up contributions are permitted to make those contributions in addition to catch-up contributions under Code Sec. 414(v), as increased under Code Sec. 414(v)(2)(E). In the preamble to T.D. 10033, the IRS noted that the catch-up contributions described in Code Sec. 414(v) may apply in a year in which a participant also qualifies for the special Code Sec. 403(b) catch-up contributions. Thus, the IRS agreed that catch-up eligible participants attaining age 60, 61, 62, or 63 who are eligible to make the special Code Sec. 403(b) catch-up contributions are permitted to make those contributions in addition to catch-up contributions under Code Sec. 414(v), as increased under Code Sec. 414(v)(2)(E).

Interaction of the Catch-Up Limits Under Section 109 and 117 of the SECURE 2.0 Act

Consistent with Section 117 of the SECURE 2.0 Act, for a tax year beginning in 2024, Prop. Reg. Sec. 1.414(v)-1(c)(2)(ii)(C) set forth a higher applicable dollar catch-up limit for a participant in a SIMPLE plan that is sponsored by an eligible employer described in Code Sec. 408(p)(2)(E)(iv) and for which the higher applicable dollar catch-up limit under Code Sec. 414(v)(2)(B)(iii) applies automatically or by election. The higher applicable dollar catch-up limit under Prop. Reg. Sec. 1.414(v)-1(c)(2)(ii)(C) was 110 percent of the applicable dollar catch-up limit that applied to the individual under Pro. Reg. Sec. 1.414(v)-1(c)(2)(ii)(A) during a tax year beginning in 2024. For tax years after 2024, Prop. Reg. Sec. 1.414(v)-1(c)(2)(iii)(C) provided that this higher applicable dollar catch-up limit is to be adjusted for changes in the cost of living.

With respect to an individual who attains age 60 through 63 in a year in which the individual participates in a SIMPLE plan to which the higher applicable dollar catch-up limit under Section 117 of the SECURE 2.0 Act applies, practitioners requested that the final regulations clarify whether the SIMPLE plan may provide that the applicable dollar catch-up limit equals the general applicable dollar catch-up limit for SIMPLE plans under Code Sec. 414(v)(2)(B), increased by (1) 150 percent of the applicable dollar catch-up limit that would otherwise be in effect under Section 109 of the SECURE 2.0 Act, and (2) 110 percent of the applicable dollar catch-up limit that would otherwise be in effect under Section 117 of the SECURE 2.0 Act. The IRS stated that, as in the proposed regulations, Reg. Sec. 1.414(v)-1(c)(2)(ii)(C) in the final regulations provides that the 10 percent increase under Section 117 of the SECURE 2.0 Act applies to the applicable dollar catch-up limit in effect under Reg. Sec. 1.414(v)-1(c)(2)(ii)(A). Reg. Sec. 1.414(v)-1(c)(2)(ii)(A) sets forth the otherwise applicable dollar catch-up limit for SIMPLE plans, without regard to the higher limit under Section 109 of the SECURE 2.0 Act (which is set forth in Reg. Sec. 1.414(v)-1(c)(2)(ii)(B)). Thus, under the final regulations, the 10 percent increase under Section 117 of the SECURE 2.0 Act applies only to participants in affected SIMPLE plans who are not permitted to make the increased catch-up contributions under Section 109 of the SECURE 2.0 Act.

Applicability Dates

The amendments to Reg. Secs. 1.401(k)-1 and 1.403(b)-3 apply for tax years beginning after December 31, 2023. The amendments to Reg. Sec. 1.414(v)-1 apply with respect to contributions in tax years beginning after December 31, 2026. However, the final regulations permit a taxpayer to elect to apply: (1) Reg. Sec. 1.414(v)-1(c)(2)(ii)(C) and (c)(2)(iii)(C) (relating to the higher catch-up limit for certain newly-established SIMPLE plans) with respect to tax years beginning after December 31, 2023, and (2) Reg. Sec. 1.414(v)-1(c)(2)(i)(B), (c)(2)(ii)(B), and (c)(2)(iii)(B) (relating to the higher catch-up limit applicable during the tax year of attainment of age 60 through 63) with respect to tax years beginning after December 31, 2024. For a plan that is not maintained pursuant to a collective bargaining agreement and not a governmental plan within the meaning of Code Sec. 414(d), Reg. Sec. 1.414(v)-2 applies with respect to contributions in tax years beginning after December 31, 2026.

Prior to the applicability date of the final regulations, a reasonable, good faith interpretation standard applies with respect to the statutory provisions reflected in the final regulations. For example, with respect to contributions in tax years prior to the applicability date of the final regulations, this standard would be met if the determination of whether a participant's FICA wages for the preceding calendar year exceeded the Roth catch-up wage threshold is made by referencing the FICA taxes imposed by Code Secs. 3101(b) and 3111(b) (rather than Code Secs. 3101(a) and 3111(a)).

For a discussion of catch-up contributions to applicable employer plans, see Parker Tax ¶131,135.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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