A saver who turns 50 this year can put an extra $8,000 into a 401(k) on top of the $24,500 elective deferral limit. Someone aged 60 to 63 can put in $11,250.
For most people that money can go in before tax. From taxable years beginning after 31 December 2026, for a particular group of savers, it cannot.
What the rule actually says
The final regulation is narrow and its wording does the work. A catch-up contribution must be a designated Roth contribution where the participant's "wages as defined in section 3121(a) for purposes of the taxes imposed by sections 3101(a) and 3111(a)" from "the employer sponsoring the plan" exceeded $145,000 in "the calendar year preceding the calendar year in which the taxable year begins."
Pre-tax catch-up is not reduced for those people. It is unavailable. The contribution still goes in; the tax treatment moves from a deduction now to no tax later.
The date almost everyone gets wrong
The rule is widely described as a 2026 change. The regulation says it "applies to contributions in taxable years beginning after December 31, 2026."
For a calendar-year saver that is 2027. The final rule took effect on 17 November 2025, and collectively bargained and governmental plans have later dates of their own. A plan may adopt it early, which is why some payrolls will behave as though it has already started.
The wage number is narrower than your salary, and it is per employer
This is the detail that decides who is caught, and it is not the number on an offer letter.
Section 3121(a) wages are Social Security wages: box 3 of the W-2, which stops at the Social Security wage base. They are not Medicare wages in box 5, which do not stop. They are not total compensation.
Deferrals into the plan count towards that figure, so a saver who deferred heavily last year can clear the threshold on wages that never reached their bank account.
Two further words carry weight: the wages counted are from "the employer sponsoring the plan," and they are the preceding calendar year's. Someone who changed jobs in the measurement year may have earned well above $145,000 in total and still fall under it at the new employer, because only that employer's wages count. Someone who left a well-paid job and took a lower-paid one is measured on the year they have already left behind. The rule looks backwards at one payroll at a time.
The threshold is indexed, from a base period of the calendar quarter beginning 1 July 2023, and rounded down to the next lower multiple of $5,000 — so it moves in steps rather than smoothly, and will sit still for a year or more at a time.
The plan may decide for you
Most savers will never make this election themselves. The regulation permits a deemed election: the plan provides that a participant subject to the requirement "is deemed to have irrevocably designated any elective deferrals that are catch-up contributions as designated Roth contributions once the participant's elective deferrals... exceed the section 401(a)(30) limit."
The participant must be given an effective opportunity to elect otherwise. In practice the switch happens partway through the year, when ordinary deferrals hit the limit, and the first most people know of it is a change in their take-home pay.
Where a contribution goes in wrongly, the regulation supplies two corrections: transferring it, adjusted for earnings and losses, from the pre-tax account to the Roth account and reporting it on Form W-2, or rolling it directly over and reporting it on Form 1099-R.
What this means for a saver
Nobody loses the ability to make a catch-up contribution, and the amounts are unchanged, in the way that the menu of alternatives inside a retirement plan changed what was offered rather than what could be saved. What changes is when the tax is paid, and for a high-earning saver close to retirement that is a real cost in the year it lands — the deduction that used to arrive with the contribution does not.
Worth knowing, then: which W-2 box your plan reads, and whether your employer intends to adopt early. A benefits administrator can answer both in a sentence, and neither is something a saver can work out from a payslip.
What to watch
The indexed threshold for the measurement year, which decides the 2027 contributions and arrives with the ordinary cost-of-living adjustments. In $5,000 steps, it may not move at all.
Then how many plans adopt early. The regulation permits it, and a plan that switches ahead of the date will change savers' pay packets a full year before it has to.
The requirement, the $145,000 threshold, the indexing mechanism from a base period of the calendar quarter beginning 1 July 2023 in $5,000 steps, the measurement of section 3121(a) wages from the employer sponsoring the plan for the preceding calendar year, the applicability to taxable years beginning after 31 December 2026, the deemed election tied to the section 401(a)(30) limit, and the two correction methods are from 26 CFR 1.414(v)-2 and from the Treasury and IRS final rule "Catch-Up Contributions" (RIN 1545-BR11, TD 10033), published in the Federal Register on 16 September 2025, document number 2025-17865, effective 17 November 2025. The 2026 contribution figures of $24,500, $8,000 and $11,250 are from the IRS's published contribution limits for 401(k) and profit-sharing plans. We could not retrieve the Federal Register's own page for the rule, which refused our requests, and worked from the government publishing office text and the codified regulation instead. The analysis is our own.
Topics moneyretirementregulation
