Get Ready for a Major Change in the Tax Treatment of 401(k) Catch-Up Contributions
SECURE Act 2.0 introduces new rules applicable to 401(k) plan catch-up contributions that will take effect in 2026. This Alert provides a brief explanation of catch-up contributions and actions which plan sponsors and employers need to take now to address this change in the law. Participants in a 401(k) plan who are age 50 or older by the end of the calendar year can make “catch-up contributions” if they have made their maximum 401(k) contributions for the year. In 2025, the 401(k) contribution is limited to $23,500. The maximum catch-up contribution in 2025 is $7,500 , with an exception for participants ages 60-63 whose catch-up contribution limit in 2025 is $11,250 . These dollar amounts are subject to cost-of-living adjustments. In 2025, 401(k) and catch-up contributions can be made either on a pre-tax basis or after-tax as a Roth contribution. Investment earnings on both types of catch-up contributions are tax-deferred while they remain in the plan. However, pre-tax catch-up contr...