IRS 2027 Catch-Up Rules: Mandatory Roth Requirements for High Earners
The IRS has finalized regulations implementing SECURE 2.0's mandatory Roth catch-up requirement, which takes effect in 2027. This change significantly impacts how high-earning retirement savers can make catch-up contributions to their Solo 401(k) and other employer-sponsored retirement plans.
Starting in 2027, the SECURE 2.0 Roth catch-up rule becomes mandatory for participants earning over $150,000. There is no grandfathering provision for existing contributors.
Understanding the New Roth Catch-Up Rule
Under current rules, participants age 50 and older can make catch-up contributions on either a pre-tax or Roth basis, depending on plan provisions. The SECURE 2.0 Act changes this for higher-income participants.
Beginning in 2027, participants age 50 or older who earned more than $150,000 in FICA wages from their employer in the prior year must make all catch-up contributions on a Roth (after-tax) basis. This means taxes are paid on contributions in the year they are made, rather than at withdrawal.
This requirement applies to all 401(k), 403(b), and governmental 457(b) plans, including Solo 401(k) plans for self-employed individuals who receive FICA wages from their business.
Implementation Timeline
The following key dates apply to the mandatory Roth catch-up requirement:
Critical Dates
- January 1, 2027: Mandatory Roth catch-up requirement takes effect. The IRS administrative transition relief period ends.
- December 31, 2025: Current IRS administrative relief expires. Plan administrators should ensure systems are updated for compliance.
- Early Adoption: Plan sponsors may choose to implement the Roth catch-up requirement before the mandatory effective date.
Who Is Affected by the New Rules
High Earners ($150,000+ in FICA Wages)
- All catch-up contributions must be made on a Roth (after-tax) basis
- No pre-tax deduction available for catch-up contributions
- Contributions grow tax-free and qualified withdrawals are tax-free in retirement
Participants Under $150,000
- No changes to current catch-up contribution rules
- Pre-tax catch-up contributions remain available
- Choice between pre-tax and Roth catch-up contributions (if plan allows)
Current Catch-Up Contribution Limits
The following catch-up contribution limits apply for 2024 and 2025:
Contribution Limits
- 2024: $23,000 regular + $7,500 catch-up = $30,500 total
- 2025: $23,500 regular + $7,500 catch-up = $31,000 total
- Enhanced catch-up for ages 60-63: Up to $11,250 catch-up (total $34,750 in 2025)
The enhanced catch-up provision for participants ages 60-63 was also introduced by SECURE 2.0, providing additional contribution capacity for those nearing retirement.
Impact on Solo 401(k) Participants
Self-employed individuals with Solo 401(k) plans should understand how these rules apply to their specific situation.
The determining factor is FICA wages versus self-employment income. Only FICA wages from the plan-sponsoring entity count toward the $150,000 threshold.
Solo 401(k) plans that already offer Roth contribution options are positioned for compliance. However, participants receiving qualifying FICA wages must use the Roth option for catch-up contributions starting in 2027. Not all Solo 401k providers offer Roth options, so verify your plan includes this feature before the requirement takes effect.
Key Provisions in the Final Regulations
The final IRS regulations include several notable provisions beyond the basic Roth catch-up requirement:
Optional Wage Aggregation
Plan administrators may choose to aggregate wages from related employers when determining whether a participant meets the $150,000 threshold. This is an optional provision, so practices may vary across different plan sponsors.
Correction Procedures
The regulations include guidance on correcting errors when catch-up contributions are made incorrectly during the transition period.
Special Plan Rules
The regulations include specific provisions for governmental plans, collectively bargained plans, and plans covering Puerto Rico participants.
Planning Strategies
Tax Implications
Understanding the trade-offs of mandatory Roth catch-up contributions:
Current-year impact:
No tax deduction available for catch-up contributions
Long-term benefit:
Tax-free growth and qualified withdrawals in retirement
Additional benefit:
No required minimum distributions (RMDs) on Roth balances
Steps to Consider Before 2027
- Review your contribution strategy – Evaluate whether to maximize regular pre-tax contributions before the new rules take effect
- Analyze your tax bracket projections – Compare your current marginal rate to your expected rate in retirement
- Consider maximizing regular 401(k) contributions – Regular contributions remain eligible for pre-tax treatment
- Evaluate Roth conversion opportunities – Strategic conversions may complement the new catch-up requirements
Enhanced Catch-Up Contributions (Ages 60-63)
Beginning in 2025, participants ages 60 through 63 may contribute up to $11,250 in catch-up contributions, rather than the standard $7,500. This allows for total employee deferrals of $34,750 in 2025.
Frequently Asked Questions
Q: What compensation counts toward the $150,000 threshold?
A: The threshold is based on FICA wages from the prior year from the employer maintaining the plan. Plans may optionally aggregate wages from related employers, but this is not required.
Q: Can regular 401(k) contributions still be made pre-tax?
A: Yes. The mandatory Roth requirement applies only to catch-up contributions for high earners. Regular elective deferrals may still be made on a pre-tax basis.
Q: What if my income fluctuates around the $150,000 threshold?
A: The determination is made annually based on prior year FICA wages. Your catch-up contribution treatment may change from year to year depending on whether you exceed the threshold.
Q: Are Solo 401(k) plans subject to any special rules?
A: Solo 401(k) plans are subject to the same rules as other 401(k) plans. There are no exemptions or special provisions for self-employed participants.
Summary
The SECURE 2.0 mandatory Roth catch-up rule represents a significant change for high-income retirement savers starting in 2027. While participants will lose the immediate tax deduction on catch-up contributions, they will benefit from tax-free growth and withdrawals, as well as no required minimum distributions on Roth balances.
The overall impact depends on individual circumstances, including current versus expected retirement tax brackets and long-term financial planning goals.
Recommended action: Review your retirement contribution strategy, evaluate whether to maximize regular pre-tax contributions, and verify your Solo 401k provider supports Roth contributions before the 2027 requirement takes effect.
Last Updated: September 2025, based on the final IRS regulations.
This content is for educational purposes only and should not be considered personalized financial advice. Consult with a qualified financial advisor for guidance specific to your situation.