Earn Over $150,000? Your 401(k) Catch-Up Contributions Just Went Roth Whether You Wanted the Tax Bill or Not
A quiet payroll change that took effect in January is already reshaping the tax bills of high earners with 401(k) catch-up contributions, and most people have no idea their withholding is now running short.
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The rule everyone previewed last winter has been running silently through your paycheck since January. If your 2025 FICA wages from your current employer topped $150,000, every dollar you’re putting into 401(k) catch-up this year is going in as Roth, whether you elected it or not.
This is current law, not a proposal or phase-in. Under Section 603 of the SECURE 2.0 Act, codified at IRC Section 414(v)(7), and confirmed by IRS Notice 2025-67, catch-up dollars from high earners must land in a designated Roth account. The statutory figure readers saw in older coverage was $145,000; inflation indexing in $5,000 increments moved it to $150,000 for the 2025 lookback that governs 2026.
Confirm It Hit Your Paycheck in Two Documents
First, pull your 2025 W-2. Check Box 3, Social Security wages, against $150,000. Box 3 is what tax experts point to for this test, and the number that matters is FICA wages from the plan-sponsoring employer, not household income and not this year’s salary.
Second, pull a recent 2026 pay stub. Find the retirement line. Contributions above the $24,500 base deferral limit are catch-up dollars, capped at $8,000 for workers 50 and up and $11,250 for the age 60 to 63 “super catch-up” window. Those catch-up dollars should be coded Roth. Many payroll systems flipped the default in January and sent a one-line notice nobody read.
Your 2026 Withholding May Be Running Short
This is the piece with a shot clock. Pre-tax catch-up contributions used to reduce your taxable wages every pay period. Roth catch-up contributions don’t. If your W-4 was calibrated to years of pre-tax behavior, your 2026 withholding is likely running short against a higher taxable income than the plan was expecting.
Discovering that in April is expensive. Fixing it in September is a paperwork afternoon. With the 24% bracket applying to single filer income over $105,700 and joint filer income over $211,400, the gap for a six-figure earner isn’t trivial. The exact number depends on your bracket and total income, so avoid a quick multiplication and file a revised W-4 with payroll, or send a Q4 estimated payment through IRS Direct Pay. Either move closes the gap before underpayment penalty math starts.
Job Change or Two Employers? Ask Before You Assume
The wage test runs against the sponsoring employer, not your household. Someone who cleared $150,000 at a prior job but started fresh in 2026 with a new company may not trigger the rule at the new plan this year. Someone juggling two W-2s may trigger it at one plan and not the other. Don’t guess. Ask the plan administrator in writing which prior-year wage figure they’re using.
If Your Plan Still Lacks a Roth Option, You’re Losing Room
About 96% of 401(k) plans offered a Roth account in 2024, and the share is close to universal now. If yours is in the holdout minority, high earners can’t make catch-up contributions at all until the plan adds a designated Roth account. With roughly four months left, that contribution room is being lost permanently for 2026. Ask HR in writing whether the plan intends to become compliant before December 31.
Self-employed workers without FICA wages, and savers whose retirement money moves through IRAs rather than an employer plan, sit outside this test entirely. That’s a fact pattern to walk through with a CPA, not a workaround to build around.
Verdict: Good for Some, a Prepayment Penalty for Others
The upside case is real for workers whose retirement income will trip the 2026 IRMAA thresholds that begin at $109,000 MAGI for single filers and $218,000 for joint filers, or push more Social Security benefits into taxation. Roth balances don’t count toward those tripwires.
The other side gets less airtime and deserves more. A worker in peak earning years who expects a materially lower bracket in retirement is being made to prepay tax at the highest rate they’ll ever pay, with no election available. The rule doesn’t distinguish between those two people, and Congress didn’t build a switch (it’s one of nine IRS rules that quietly drain retirement accounts, all charted in our free tax trap map).
Your Four-Month Action List
- Confirm 2025 FICA wages (W-2 Box 3) against $150,000.
- Verify how your 2026 catch-up dollars are being coded on a current pay stub.
- Review 2026 withholding and correct it now, not at filing.
- Confirm your plan actually offers a designated Roth account.
- If retirement income will sit near IRMAA territory, run the tradeoff with a fee-only advisor before year end.
This article is general information, not tax advice. Confirm your situation with a qualified tax professional.
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