With all the SECURE 2.0 Act updates that have happened in the last few years, it’s easy to lose track of which rules actually impact your business. One of the biggest changes that employers need to pay attention to is the new Roth catch-up contributions requirement for high earners. Below, we break down what everything means, why it’s happening, and what you need to focus on as 2026 approaches.

What is the SECURE 2.0 Change?

Simply put, the 2026 SECURE 2.0 change will affect employees who made more than $145,000 in W-2 Box 3 wages in the previous calendar year (also known as Highly Paid Individuals, or HCIs), are 50+, and are making catch-up contributions. Under the update, these contributions will be designated as Roth contributions, which means they can be withdrawn tax-free.  

What Might be Confusing and Clarifying the Benefits

Why it’s unclear:

  • There are multiple moving parts between age, wage threshold, catch-up contributions, and Roth vs. pre-tax designation.
  • This rule affects participants 50+ whose W-2 Box 3 wages exceeded $145,000 in the prior year. Because both factors apply, some participants may not realize they’re included.
  • The change is really only about catch-up contributions for affected participants. Everything else regarding their plans is still safe and the same.
  • Pre-tax or Roth contributions both have their pros and cons, but this change can affect participant satisfaction, employer communications, and nondiscrimination testing.
  • Implementation must align, meaning payroll systems, deferral setups, and participant disclosures must be figured out ASAP.

What are the benefits?

  • More tax-free income in retirement: Participants get the ability to balance out their future tax liability.
  • Forward-thinking savings model: Many savers already prefer Roth contributions, so this change just pushes plans towards this approach more.
  • Simpler long-term planning: Roth catch-ups ensure high-earning employees are maximizing their savings early and diversifying their retirement strategy.
  • Clearer payroll and recordkeeping: Once your systems are updated, you’ll know exactly who the affected employees are and will be able to make the correct contribution types and deliver proper communications.
  • Improved transparency: After-tax contributions can help employees better see how their savings grow over time.

What Advisors, Employers, and Employees Need to Do

Employers

To get ready for the change ahead of time, you’ll want to be sure your payroll and recordkeeping systems can identify the employees who will exceed the $145,000 threshold and have their catch-ups changed to Roth. To communicate changes clearly, take the time to update plan documents and deferral elections sooner rather than later. And to keep participants engaged and satisfied, make sure to review and emphasize any major features that will keep them on track with their savings strategy despite the change, like investment options or other tax savings.

Highly Paid Individuals

If you made more than $145,000 in the last calendar year, you’ll be required to follow this new rule. It’s worth revisiting your overall savings strategy to see how this will align with your goals and even working with an advisor to ensure you’re optimizing Roth contributions as best as you can.

Advisors

Advisors play a key role in helping their clients navigate this transition. Use this as a chance to walk employers through the tradeoffs of Roth vs. pre-tax contributions and help them understand how the rules affect them and their teams. Be sure to simplify any message to reduce frustrations, and coordinate plan update discussions if needed. This is also a great opportunity to highlight how Ubiquity’s flat fee, payroll agnostic approach will help them keep things consistent and simple.

How Ubiquity Helps You Navigate This

Your Ubiquity team is already planning for these changes so that 2026 can kick off with success. We make sure that this kind of regulatory change is built-in and communicated clearly. Here’s how:

  • 3(16) fiduciary services: Our experts will help you review your plan documents, policies, and procedures now so you can avoid any headaches and stay compliant.
  • Flat fee pricing and payroll-agnostic integrations: Even with Roth changes, we’ll ensure your plan costs stay consistent, and your deferral elections flow correctly.
  • Open architecture and participant communications: We provide the flexibility, tools, and education necessary to help you communicate this change clearly to your participants (especially for those high earners).
  • Advisor support and education: Advisors, we’ve got your back also. Whether you’re an advisor or have one, we’re ready to walk through the who, what’s, when’s, and how’s, and prep materials and communications.

Quick Takeaways

Be sure to keep this list handy to understand the necessary details, especially as the end of 2025 is quickly approaching:

  • Under SECURE 2.0, catch-up contributions made by employees who are 50+ whose FICA wages from the previous year exceeded $145,000 in W-2 Box 3 wages must be designated Roth.
  • This only impacts catch-up contributions.
  • Employees will be able to benefit from tax-free growth and distributions under Roth.
  • High-earning participants should understand where they stand now, if the Roth catch-ups align with their retirement strategy, and what other savings vehicles might be available.
  • Employers and advisors should communicate this change soon, update payroll and recordkeeping systems, and review plan documents and design as needed.
  • Ubiquity will be here to support you through this change, no matter if you need to walk through system readiness or strategic advisor support.  

Wrapping Up

Because of the Roth contribution changes that are coming with SECURE 2.0, now is prime time to reevaluate your current plan, or make the upgrade to a 401(k) that will help you effortlessly comply to new rules while still allowing you to maximize your savings.  

At Ubiquity, we’re here to help you simplify, clarify, and execute with our flat-fee, customizable 401(k) plans. As the retirement landscape continues to evolve, we’ll continue breaking down what matters most to you and your team, so you can always stay on track with your long-term goals without missing a beat.

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