The US Roth catch-up rule looks back a year, with a W-2 wrinkle in 2026

A worker can earn less this year than last year and still meet the wage test that changes how a 2026 retirement catch-up is taxed. The rule looks backwards, and it looks at wages from a particular employer rather than a household’s current income.

For 2026, the dividing line is $150,000. An eligible participant whose 2025 wages from the employer sponsoring the workplace plan exceeded that amount generally must make any 2026 catch-up contributions as designated Roth contributions. The ordinary age-50 catch-up limit for most 401(k), 403(b) and governmental 457 plans is $8,000 this year. A higher $11,250 limit applies to eligible people who turn 60, 61, 62 or 63 during 2026.

Those figures describe what a plan may permit. They do not mean every worker can or should contribute the maximum, and they do not replace the plan’s own terms. Catch-up contributions are available only through a plan that offers them, and the Roth requirement matters only when a contribution is treated as a catch-up.

The $150,000 figure can easily be mistaken for a current salary or adjusted-gross-income threshold. It is neither. Notice 2025-67 describes it as the Roth catch-up wage threshold for 2025, used to determine the treatment of 2026 catch-up contributions.

The statutory test uses wages from the employer sponsoring the plan in the preceding calendar year. Under the final Treasury regulations, that generally means Social Security wages reported in Box 3 of Form W-2. Wages from an unrelated second employer are not automatically added. The final rules do allow a plan to aggregate wages in certain related-employer or common-paymaster arrangements, so even the phrase “one employer” can require a look at the plan’s terms.

A person with no relevant wages from that employer in 2025 may fall outside this Roth-only catch-up test for 2026, even if other earnings were high. The final-regulation preamble gives examples including a partner with only self-employment income and some state or local government employees without the relevant FICA wages. That is a consequence of the wage definition, not a broad exemption from retirement-plan rules.

The word “exceeded” also matters. The official test is over $150,000, not $150,000 or more. The threshold is indexed, so a later year can use a different figure.

The law’s administrative transition period ended on 31 December 2025, so the Roth catch-up requirement is in play in 2026. The detailed final regulations, however, generally apply to contributions in taxable years beginning after 31 December 2026, with later timing for certain governmental and collectively bargained plans.

Before those detailed rules become applicable, Treasury and the IRS allow a reasonable, good-faith interpretation of the statute. The final-regulation preamble says that standard can be met in 2026 by using Medicare wages, generally shown in Box 5 of Form W-2, rather than the Social Security-wage measure in Box 3.

That does not turn the choice of W-2 box into an employee election. It is an implementation question for the plan and employer during the pre-applicability year. Two plans can therefore appear to use different wage fields in 2026 without one difference alone proving an error. The relevant plan notice, payroll communication or administrator explanation should identify how the test is being applied.

The final rules also permit a deemed Roth election in plan design. In broad terms, a plan may automatically classify affected catch-up deferrals as Roth while giving the participant an effective opportunity to make a different permitted election, including making no catch-up contribution. The precise operation depends on plan terms and can become more complex where earlier Roth deferrals, special 403(b) catch-ups or multiple participating employers are involved.

A designated Roth contribution is included in gross income in the year it is made. It does not produce the current federal income-tax exclusion associated with a pre-tax salary deferral. Qualified distributions from the Roth account, including eligible earnings, are excluded from gross income when the distribution rules are met.

That tax timing is the practical consequence of the routing rule. It is not a new income tax, a penalty or an extra contribution allowance. Pre-tax and Roth employee deferrals share the applicable annual elective-deferral ceiling, while the catch-up amount sits above that basic limit for eligible participants.

For most covered plans, the basic employee elective-deferral limit is $24,500 in 2026. Adding the ordinary $8,000 age-50 catch-up produces a potential combined employee limit of $32,500. For an eligible participant aged 60 to 63, the higher catch-up can bring that figure to $35,750. Compensation, plan limits and other rules can reduce what is available in an individual case.

A plan without a qualified Roth contribution programme is not automatically required by the final regulations to add one. Under the regulatory framework, it may instead prevent participants subject to the Roth requirement from making catch-up contributions. That possibility is another reason the practical question is broader than “Which tax treatment do I prefer?” Availability comes first.

The useful sequence is therefore mechanical, not predictive. Is the participant catch-up eligible under the plan? Which 2025 wages does the plan use for its 2026 test? Did those employer-linked wages exceed the indexed threshold? Does the plan offer the necessary Roth route? Only then does a catch-up contribution reach the tax-treatment fork.

A current salary headline cannot answer all four questions. The rule starts with last year’s payroll record and ends in this year’s plan design.