Roth Catch-Up Gets Real: Navigating SECURE 2.0 Changes in 2026

Keeping with December’s theme, SECURE 2.0 has been the gift that keeps on giving. Attitudes may vary on whether the gifts are beneficial, but at least it’s been interesting since 2022! Each year’s new provisions have challenged industry practices and unveiled new opportunities.

2026 is no different. From Roth catch-up contributions to new paper statement requirements and distributions for long-term care premiums, the coming year promises to test your adaptability and attention to your clients’ needs. Below are some factors to consider or questions to evaluate to ensure compliance and deliver value.

Catch-Up Contributions As Roth

To pay for lost tax revenue in other SECURE 2.0 provisions, Congress will require highly paid individuals or HPIs – hat tip to Ferenczy Benefits Law Center for the label – to make catch-up contributions as Roth. This change was initially set to be effective in 2024. The IRS provided a transition period until 2026 to give our industry more time to plan this out. With limited IRS guidance, it was tough to adequately prepare the procedures or systems so be ready to adapt to challenges in 2026.

A lot has already been written about this provision, mainly about how it will test the processes and controls of both payroll providers and recordkeepers. In order to avoid repeating what others have written, here are four quick factors you should consider in rolling out this new change in 2026:

• $150,000 is the new magic number: Forget the old $145,000 threshold – 2026 brings a fresh limit of $150,000 in FICA wages (see Notice 2025-67) in determining an HPI. Be cautious when using this limit as it applies differently than other limits, such as determining highly compensated employees. For HPI determination, if an employee made more than $150,000 in FICA wages in 2025, that employee must make any catch-up contributions as Roth in 2026.
• Dodging the Roth dilemma: Want to avoid this whole catch-up as Roth mess? The solution is to remove (or not add) the employees’ ability to make Roth deferrals. Great solution for those who work on the plan a lot. But beware, HPIs are likely to be upset that they no longer can make any catch-up contributions, even if they need to be designated as Roth. Who exerts more influence in the company will determine if removal of the Roth option is a viable solution.
• Deemed or separate election: IRS guidance allows plans to have a deemed election to possibly ease plan administration. A deemed election means HPIs’ catch-up contributions automatically are designated as Roth unless they opt out (and lose the ability to make catch-up contributions). The alternative is to have a separate election for HPIs to actively choose Roth for catch-up contributions (failure to choose means no catch-up contributions). Many employers are trying to determine which is the best method for their plan needs. The deemed election will be best for those looking for flexibility in correcting mistakes (see below).
• Mistakes happen: The IRS provides two correction methods for plans utilizing the deemed election option. If the mistake is caught before Form W-2s go out (i.e., January 31), then the funds can be returned to the employee, and the W-2 is adjusted accordingly. If after the W-2 deadline, then the funds can be converted to a Roth account which follows the same process as an in-plan Roth conversion, including a Form 1099-R to report the taxable event. Not using the deemed election option? Mistakes are fixed with corrective distributions.

Paper Statements

Congratulations to lobbyists representing the paper industry. As the rest of world continues towards a paperless society, participant statements must be provided on paper for plan years beginning after 12/31/2025. To assist with this change, Congress had required the DOL to update its electronic disclosure regulations “not later than December 31, 2024.”

To date, nothing has been provided by the DOL. There appears to be some guidance coming early in 2026. Let’s hope that it balances the paper requirement with an electronic option to match how most employees receive information in their daily lives. Here is what we know currently:

• Individual account plans: At least one statement must be furnished on paper in a calendar year. It will be interesting to see how this works in 2026. The most relevant quarterly statement is likely the year-end one. However, for 2026 (whether calendar plan year or otherwise), that would be delivered in the 2027 calendar year. Does that mean a random quarterly statement will have to be sent on paper for the 2026 calendar year to meet the requirement? Then can the change to year-end statement be made going forward? Be on the lookout for the upcoming guidance as it will hopefully cover this issue.
• Defined benefit plans: At least one statement must be furnished on paper every 3 calendar years. Thankfully, the 3-year period allows more time for guidance to be released and digested before any administration is needed.
• Participant opt out: Employees can elect full electronic disclosure if desired. Moreover, it would be nice if the DOL would work with the IRS in revising overall electronic disclosure guidance for both agencies. Having a single set of requirements for electronic disclosures would be welcomed by the retirement plan industry!

Long Term Care Insurance Premiums

Paying for long-term care (LTC) insurance premiums will be added to the growing list of in-service distributions. Like other distribution options, this one is discretionary. In other words, there is no obligation for employers to add this provision to their plan. Here are four key points to consider if clients are considering the inclusion of this distribution option in their plan:

• Max amount: For LTC premiums, the distribution amount must be the lesser of $2,600 (in 2026, indexed) or 10% of the vested balance. This is an annual maximum amount.
• Penalty exemption: The distribution is not subject to the 10% early withdrawal penalty, if applicable. As with other in-service distributions, the amount must still be included in taxable income and is subject to mandatory withholding as an eligible rollover distribution.
• Requires statement: An added wrinkle to this distribution option is that the employee must provide a statement to the plan with specific information. Many plans with other in-service distribution options have been moving to the newly permitted employee self-certification process to reduce administrative burden. Although self-certification is still possible for LTC premiums, this required statement may take some modifications to that process to collect the necessary data.
• Effective date: This distribution option actually becomes effective on 12/29/25 – three years after the signing of SECURE 2.0. This may be important to employees who want to get a jump start on paying LTC premiums with plan assets. Those employees will have a few days in 2025 to take a distribution before taking another one in 2026. Be careful with this strategy as the insurance company offering the LTC policy must file a statement with the IRS. Make sure the insurance company is doing this for 2025 if you want to utilize this strategy.

Preparing For 2026 And Beyond

SECURE 2.0 provisions continue to reshape the retirement plan landscape in 2026, bringing both new opportunities and operational challenges. As with prior provisions, catch-up as Roth, paper statements and distributions for LTC premiums require careful planning and proactive measures. Staying informed and ready to adapt will be key to successfully navigating these updates.

Unfortunately (or fortunately), the gifts of SECURE 2.0 are almost over. For 2027, there is only one more provision to take effect. The transition from a saver’s credit to a saver’s match. That change has the potential to be a significant disruptor in how our industry transfers payments and information. But that blog can wait for another day. For now, wishing you all the best in 2026!

About the Author

Brian Furgala, Esq., CPC, QPA is Senior Director, Retirement Services Strategy for PenChecks, a leader in outsourced retirement plan distribution processing and Automatic Rollover/Missing Participant IRAs and related services. His broad experience as an ERISA attorney and senior executive for several leading retirement plan service providers gives him a unique perspective on the industry.

The views expressed in this article are those of the author and do not necessarily represent the views of PenChecks Trust®, its subsidiaries or affiliates.