In a previous article, we outlined the IRS’ proposed regulations implementing Section 603 of the SECURE 2.0 Act, which requires certain high earners to make catch-up contributions on a Roth basis beginning in 2026. Since that time, Ice Miller has received several questions regarding how this new Roth requirement interacts with the special catch-up contribution rules under Code Section 457(b).
Although the statutory language in SECURE 2.0 is not entirely clear, the IRS’ preamble1 to the proposed regulations suggests that a high earner who is eligible for both the special 457(b) catch-up and the age 50 catch-up may make pre-tax contributions up to the amount of their underutilized deferrals. Only the portion of catch-up contributions that exceeds the participant’s available special catch-up limit, and is therefore made under Section 414(v), must be made as Roth contributions. This Roth requirement applies only if the participant has not already satisfied the age 50 catch-up limit with Roth contributions earlier in the year.
To illustrate, consider a participant who is eligible for a $5,000 special catch-up in 2026 and is also eligible for the $7,500 age 50 catch-up limit under Section 414(v). If the participant is a high earner, the $5,000 special catch-up may be contributed on a pre-tax basis. The remaining $2,500, which brings the participant to the full $7,500 age 50 catch-up limit, must be contributed as Roth, to the extent the participant has not already made sufficient contributions on a Roth basis (in this example, if $2,500 in Roth contributions has been made earlier in the year, it would satisfy the participant’s Roth obligation).
Given that the statutory language is unclear, we continue to recommend deferring specific plan language addressing the coordination of Roth treatment and special catch-up limits until final regulations are issued.
[1] The preamble states: Section 603(b)(2) of the SECURE 2.0 Act amends section 457(e)(18)(A)(ii) of the Code and, pursuant to this amendment, a portion of the catch-up contributions made to an eligible governmental 457(b) plan in accordance with section 457(b)(3) and (e)(18) by a catch-up eligible individual for the last three taxable years ending before the individual attains normal retirement age must be designated Roth contributions. The portion that is subject to this Roth requirement is the amount by which the applicable dollar catch-up limit under section 414(v)(2)(B)(i) exceeds the maximum permitted contribution set forth in section 457(b)(3) (determined without regard to section 457(e)(18)).
