Your 2025 W-2 Crossed $150,000. Your 2026 Catch-Up Contribution Just Lost Its Deduction.

7 min read · Last updated October 12, 2026

Workers 50 and older with 2025 wages over $150,000 from their 401(k) plan’s sponsoring employer must make their 2026 catch-up contribution as Roth, not pretax. That caps out at $8,000 for most of them, or $11,250 for workers turning 60 to 63 in 2026.

In this article

• What triggers the mandatory Roth catch-up rule
• If your plan has no Roth option, nobody gets a catch-up
• The real decision: still contribute the catch-up, or not
• Frequently asked questions

A new wage test decides whether your 401(k) catch-up contributions are mandatory Roth or still pretax, and your plan administrator has no say in it. If your 2025 Federal Insurance Contributions Act (FICA) wages from your plan’s sponsoring employer were more than $150,000, every catch-up dollar you put in during 2026 must be a Roth contribution.

Imagine a 54-year-old operations manager who earned $162,000 in FICA wages from her employer in 2025. In 2026, if she wants to contribute the full $8,000 catch-up on top of her $24,500 regular deferral, every dollar of that $8,000 has to go in as Roth. She still gets the $24,500 pretax, but the catch-up piece loses its upfront deduction for good this year.

What triggers the mandatory Roth catch-up rule

The Internal Revenue Service (IRS) set the 2026 threshold at $150,000 in Notice 2025-67, up from the $145,000 figure written into the original 2022 law. It counts only wages reported in Box 3 of your prior year’s W-2, the portion subject to Social Security and Medicare tax. And it counts only wages from the specific employer that sponsors the 401(k), 403(b), or governmental 457(b) plan you contribute to.

That has two practical consequences. Income from a side business, a spouse’s job, or an unrelated employer does not count toward the $150,000. If you work for two related companies in the same corporate family, your plan is allowed, but not required, to add their wages together when checking the threshold.

The underlying mandate has applied since January 1, 2026, but the final regulations only formally take hold for taxable years beginning after December 31, 2026. Until then, plans are expected to follow a reasonable, good-faith reading of the rule, which is exactly what the $150,000 figure already reflects.

For 2026, the regular elective deferral limit is $24,500. Catch-up eligible workers age 50 and older can add $8,000 on top of that, for $32,500 total. Workers who turn 60, 61, 62, or 63 in 2026 get a bigger add-on, $11,250, for $35,750 total.

Savings Incentive Match Plan for Employees (SIMPLE) Individual Retirement Accounts (IRAs) and Simplified Employee Pension (SEP) plans are not covered by this mandate at all.

Age in 2026	Regular deferral limit	Catch-up add-on	Total you can contribute
Under 50	$24,500	Not eligible	$24,500
50-59	$24,500	$8,000 (Roth required if 2025 wages over $150,000)	$32,500
60-63	$24,500	$11,250 (Roth required if 2025 wages over $150,000)	$35,750
64 and older	$24,500	$8,000 (Roth required if 2025 wages over $150,000)	$32,500

If your plan has no Roth option, nobody gets a catch-up

The mandate carries a trap most new-hire paperwork never mentions. By law, if even one employee at your company crosses the $150,000 threshold, the plan cannot let anyone make pretax catch-up contributions. That includes coworkers well under the threshold, unless the plan also adds a Roth option.

In practice, most larger 401(k) providers added a Roth feature years ago specifically to prepare for this rule. Smaller plans sometimes have not. If your plan administrator has not confirmed a Roth option is active for 2026, that is the first call to make, not a question to leave for your December paycheck.

Ask your human resources (HR) department two things before year-end. First, whether the plan documents have been amended for the Roth catch-up rule. Second, whether payroll actually routes catch-up dollars to a designated Roth account starting with your first 2026 paycheck.

A plan that looks correct on paper can still misroute a contribution if payroll was never wired up to match it.

The real decision: still contribute the catch-up, or not

Imagine a 61-year-old engineer who earned $168,000 in 2025 and wants to keep contributing the full $35,750 combined limit in 2026. The regular $24,500 still reduces his taxable income dollar for dollar, but the $11,250 catch-up piece no longer does. That portion comes out of his paycheck after tax, the same way a Roth Individual Retirement Account (IRA) contribution would, and it grows tax-free from here instead of tax-deferred.

The math still usually favors contributing it anyway. A worker within a decade of retirement who skips the catch-up to avoid the after-tax hit is trading a bigger stack of tax-free retirement income for a slightly bigger paycheck today. The real decision is whether to redirect other savings, like a taxable brokerage contribution, toward the catch-up instead, since those dollars are now sheltered from investment taxes for life either way.

A taxable brokerage account has no such shelter. Dividends, interest, and realized gains inside it get taxed every year, while the same dollars inside the Roth catch-up grow untouched until retirement. For a worker a decade or more from retiring, that gap compounds into real money, not just a one-year tax trade-off.

If money is tighter than the full catch-up allows, the same sequencing logic used for capturing a 401(k) match before paying down high-rate debt applies here. Fund the regular pretax deferral first, then decide how much of the Roth catch-up actually fits the budget. If 2026 turns into a genuine cash crunch, the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act’s hardship and loan sequence is the better next read before touching retirement money at all.

The same 2026 plan might also offer a pension-linked emergency savings account (PLESA), a newer SECURE 2.0 feature worth checking before you finalize next year’s contribution mix. See whether a workplace PLESA beats a plain savings account for how the $2,500 cap and employer match actually work.

Frequently asked questions

Does the $150,000 threshold apply to my total income or just my 401(k) wages?

It applies only to Federal Insurance Contributions Act (FICA) wages, Box 3 on your W-2, from the single employer sponsoring your 401(k), 403(b), or governmental 457(b) plan in 2025. Investment income, a spouse’s earnings, self-employment income, and wages from an unrelated employer do not count toward the threshold at all.

I’m self-employed with a solo 401(k). Does this rule apply to me?

Generally no. Partners and sole proprietors with only self-employment income have no FICA wages to measure, since the threshold is built around W-2 wage reporting. The rule targets employees of a sponsoring employer, not business owners paying themselves through self-employment earnings alone.

What if my employer’s 401(k) doesn’t offer a Roth option at all?

Check with your plan administrator before year-end. Federal law says a plan cannot let any catch-up-eligible employee contribute pretax catch-up money once one worker crosses the $150,000 threshold, unless the plan adds a Roth feature. Some smaller plans may freeze catch-up contributions entirely rather than add Roth in time.

Can I just stop contributing the catch-up amount instead of going Roth?

Yes, nothing forces you to contribute above the $24,500 regular limit. But skipping the catch-up to avoid an after-tax contribution usually costs more in lost retirement savings than it saves in current-year taxes, especially for workers within 10 to 15 years of retirement who need the extra room most.

Is this the final version of the rule, or could it still change?

The $150,000 wage threshold is adjusted for inflation every year, so expect it to rise again for 2027. The IRS’s formal regulations fully phase in for taxable years starting in 2027, but the underlying requirement, including the 2026 threshold, is already in effect under a good-faith compliance standard this year.