TL Financial Group

If you are 50+, do you know how your catch-up contributions are changing?

1️⃣ Who Is Affected
Employees aged 50+ whose prior-year W-2 F**A wages from the same employer exceed $150,000 (indexed) must make any 2026 catch-up contributions as Roth (after-tax).

2️⃣ When It Applies 📅
The statute kicks in for 2026 contributions. Final IRS regulations took effect on November 17, 2025, and generally apply starting in 2027. For 2026, plans may operate under a reasonable and good-faith interpretation.

3️⃣ What to Verify 🔎
Your plan must offer a Roth source. If it doesn’t, affected employees can’t make catch-ups until Roth is added.

4️⃣ With a Roth IRA, to qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances. The original Roth IRA owner is not required to take minimum annual withdrawals. With a Roth 401(k), employer matching with pre-tax dollars is not distributed tax-free during retirement.

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