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Published by J9 Systems. What's new in business tech, and what it means for yours.

From the brief of Wednesday, November 4, 2026 · No. 20

From the daily brief

IRS Roth catch-up rule starts Jan. 1: 401(k) catch-ups for staff paid over 50,000 must be Roth

Only a handful of staff are affected at most firms, but your plan must offer a Roth option by the first 2027 payroll.

By Carter Josephson · · 1 min read

What happened

IRS final regulations under SECURE 2.0 say that for taxable years starting after Dec. 31, 2026, a 401(k) catch-up contribution from an employee whose prior-year Social Security (Box 3) wages from you topped the threshold must be made as Roth. The IRS set that threshold at 50,000 in Notice 2025-67 and indexes it each year.

What it means for a 10-to-50-person business

Take a 30-person engineering firm with a 401(k). Two principals and one senior manager earn over 50,000 and are over 50. Today they put the ,000 catch-up (the 2026 limit for age 50+) in pre-tax. From the first 2027 paycheck, if the plan has no Roth option, they cannot make catch-ups at all. Staff under the threshold are not affected, and for most shops with no one over the line the effect is zero. If your payroll provider or plan recordkeeper has not switched on Roth contributions, that is the one thing to confirm. Employers with no 401(k), or SIMPLE IRA plans, should read their plan terms first.

What to do
Ask your vendor

Ask your 401(k) recordkeeper and payroll provider by Dec. 1 whether Roth contributions and the automatic Roth switch for high earners will be live for the first 2027 payroll.

What it costs
What it costs
Roth feature at the recordkeeper
/bin/bash to 0/mo at most plans, ask
Checking which staff exceed Box 3 wages of 50,000
1 hr
Emails to affected staff
1 hr
Doing nothing
high earners over 50 may be blocked from catch-ups in 2027, and a payroll error can cost 4 to 8 hrs to fix
Sources
irs.gov (primary) · IRS: final regulations on the new Roth catch-up rule

Questions owners ask

Does this hit all my staff over 50?

No. Only those whose prior-year W-2 Box 3 wages from you exceeded the threshold, set at 50,000 by Notice 2025-67.

Three to five of these, every weekday morning.

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