Staying compliant with the evolving SECURE 2.0 requirements is becoming increasingly important as new deferral rules take effect. Several key changes — including Roth catch‑up requirements for certain employees, expanded catch‑up contribution limits, and mandatory Eligible Automatic Contribution Arrangements (EACAs) in specific situations — will directly affect how retirement plans must operate beginning in 2026.
These changes affect several areas of plan administration, from contribution structures to participant choices. Understanding how they apply in 2026 will help plan sponsors prepare effectively.
1. New Roth catch‑up requirement for highly paid individuals
Beginning in 2026, certain employees will be required to make catch‑up contributions on a Roth basis.
Who Is subject to the requirement?
Catch‑up contributions must be made as Roth contributions if an employee had more than $150,000 in FICA wages (Box 3) in the prior calendar year. For the 2026 rule, the relevant year is 2025.
This requirement:
- Applies only to IRC 414(v) catch‑up contributions
- Does not apply to the special 403(b) 15‑year catch‑up or the 457(b) 3‑year catch‑up
- Applies to 401(k), 403(b), and governmental 457(b) plans
Tracking compensation
Plans have some flexibility in what FICA wages are counted:
- Only include wages from the adopting employer, or
- If the plan document explicitly allows it:
- Include FICA wages paid by related employers, and/or
- Include FICA wages paid by a common paymaster, and/or
- Include FICA wages paid by a successor employer during year of acquisition
Key risks and recommended safeguards
Because Roth contributions must be voluntary, plan sponsors need safeguards that ensure compliance without forcing an election.
Recommended practices include:
- Adding a deemed Roth election to the plan document
- Including deemed recharacterization language in the salary deferral form
- Ensuring employees have an annual “effective opportunity” to change elections
- Avoiding any language that makes Roth mandatory (not permitted by IRS rules)
- Reviewing overlap between Highly Compensated Employees (HCEs) and High‑Paid Individuals (HPIs) to prevent benefits, rights, and features concerns
Correcting errors
If an HPI mistakenly makes a pre‑tax catch‑up contribution:
- Corrections must be applied the same way for similarly situated HPIs
- Sponsors may correct by distribution or recharacterization
- Errors under $250 may be ignored as de minimis
2. Enhanced catch‑up limits for 2026 and beyond
SECURE 2.0 introduces two separate categories of increased catch‑up limits.
Age 60–63 enhanced catch‑up limit
Employees aged 60 to 63 may contribute up to 150% of the regular annual catch‑up limit.
Additional notes:
- Applies to 401(k), 403(b), SIMPLE 401(k), and SIMPLE IRA‑based plans
- Limits must be tracked on a calendar‑year basis
- Plans with non‑calendar‑year cycles may see mid‑year switches between traditional and enhanced limits
Higher SIMPLE 401(k) deferral and catch-up limits
SIMPLE 401(k) plans may adopt:
- The standard deferral limit increased by 10%, and/or
- The standard catch‑up limit is increased by 10%
Additional notes:
- 10% increase is automatic for employers with 25 or fewer employees earning at least $5,000 in compensation
- Employers with more than 25 employees who received at least $5,000 in compensation must provide a 3% nonelective or a 4% matching contribution in order to permit the 10% increase
Important interaction rule
Plans may choose to apply either the 150% limit or the 10% increase, but they cannot apply both.
3. Mandatory EACA Requirements and the Impact on 403(b) Plans
SECURE 2.0 requires certain plans to adopt an EACA, but there are important exceptions and significant consequences, especially for newly established 403(b) plans sponsored by 501(c)(3) organizations.
When an EACA is optional
The EACA requirement does not apply if:
- The plan’s CODA (Cash or Deferred Arrangement) was adopted before December 29, 2022
- The plan is governmental, church‑sponsored, or a SIMPLE 401(k)
- The employer had 10 or fewer employees in the prior year
- The employer has existed for less than three years
The 403(b) and ERISA issue for 501(c)(3) organizations
This is one of the more challenging effects of SECURE 2.0:
- A 403(b) plan can be exempt from ERISA only if participation is completely voluntary
- EACAs require automatic enrollment, which is not voluntary
- EACAs also require default investment into a QDIA, which triggers ERISA fiduciary oversight
Result:
A newly established 403(b) plan sponsored by a 501(c)(3) may become subject to ERISA if it is required to implement an EACA.
This can lead to:
- Additional compliance requirements
- Mandatory Form 5500 filings
- Fiduciary responsibilities
- Administrative burdens that many nonprofits are unprepared to manage
Even potential alternatives, such as relying on the under‑three‑years exception, come with risk and may invite IRS scrutiny.
Key takeaways for plan sponsors and practitioners
- Prepare now for mandatory Roth catch‑up enforcement beginning in 2026
- Update plan documents to include deemed elections and appropriate wage‑tracking rules
- Review plan design to determine the correct deferral and catch‑up limit
- Carefully evaluate automatic enrollment requirements, especially for non‑ERISA 403(b) plans
- Educate payroll, HR, and operational stakeholders well before year‑end
As plan sponsors prepare for the operational and compliance demands that SECURE 2.0 introduces, having reliable tools and support becomes essential. ftwilliam.com provides an integrated platform that connects plan documents, government forms, and compliance testing in a single system, helping streamline updates and reduce administrative burden. Solutions such as ftwPortal Pro and the ftwLink API enable secure and efficient data exchange, strengthening coordination across providers and internal teams. With these capabilities, ftwilliam.com helps plan sponsors navigate the complexities of the new rules and move into 2026 with greater clarity and confidence.
Legal Disclaimer
The information summarized here is for informational and educational purposes only and does not constitute legal advice. Receipt and use of this information does not create an attorney‑client relationship. Please consult a qualified legal professional before taking any action based on this material.
