SECURE 2.0 quarterly update
Implementation updates
Highlights of the new Roth catch-up contributions playbook:
- Comprehensive analysis: Detailed explanation of the new proposed catch-up regulation and its implications.
- Requirements and considerations: Practical steps to ensure compliance and optimize your plan setup and design.
- Participant experience: Insights into how Vanguard will educate your participants about the new requirements.
- Plan sponsor road map: Important actions and milestones leading up to 2026, to help you plan and stay on track
Updates on solutions for 2026
Effective January 1, 2026, participants age 50 or older who earned more than $145,000 in FICA wages in the previous calendar year (Roth catch-up required participants) may only make catch-up contributions as Roth contributions. This means plans that offer catch-up contributions without a Roth contribution option will need to ensure that Roth catch-up required participants do not make any catch-up contributions at all.
On January 13, 2025, the Treasury Department and IRS issued a proposed regulation on catch-up contributions, with details on how plan sponsors can implement and comply with Roth catch-up rules prior to January 1, 2026. For more information on the catch-up guidance, click here.
What is changing for plan sponsors and payroll providers
- A recent proposed regulation clarified that plans offering catch-up contributions are not required to add a Roth contribution option to their plan.
- However, plans without a Roth contribution option will still need to track their Roth catch-up required participant population to ensure that these participants do not make any catch-up contributions at all.
- The Roth catch-up required participant population will be identified via a new FICA wage indicator.
- Payroll providers will be required to generate annual reports to capture all Roth catch-up required participants as soon as possible after the last payroll for 2025 and before the first pay period in 2026.
Vanguard will introduce a new Roth catch-up reporting template to plan sponsors.
- In early fall 2025, Vanguard will provide plan sponsors with a template to annually report all Roth catch-up required participants.
- Plan sponsors may begin transmitting the population to Vanguard through My Plan Manager™ as early as December 2025 if the population is known before January 1, 2026.
- This participant population will need to be shared with Vanguard annually after the last payroll of the calendar year has been processed.
Plan sponsor actions and considerations
Roth contribution benefits
While not required, Vanguard strongly encourages plan sponsors who offer catch-up contributions without a Roth contribution option to add one. Adding Roth contributions allows a tax diversification opportunity for all participants and ensures that Roth catch-up required participants can continue making catch-up contributions after January 1, 2026.
Roth contribution adoption process
Interested plan sponsors should reach out to their client success executive as soon as possible.
- The deadline to request a Roth contribution option is September 1, 2025. Vanguard cannot guarantee that requests received after this date will be completed by January 1, 2026.
- A plan amendment will be required for plan sponsors choosing to add a Roth contribution option by the end of the calendar year in which it is added.
Option 1: Roth catch-up required participants manage their own catch-up elections
- Participants in plans that choose this option will be responsible for self-managing their deferral elections, including the transition from pre-tax to Roth. Participants will need to monitor when their Internal Revenue Code (IRC) Section 402(g) contributions are maximized and potentially reset their catch-up elections each calendar year.
- Neither Vanguard nor the payroll provider will automatically convert the participant's deferral election.
- Plan sponsors choosing this option do not need to adopt any additional services by January 1, 2026.
Option 2: Payroll providers initiate automatic conversion
- Payroll providers will automatically convert the participants’ deferral election to Roth within the payroll system. Plans that choose this option will see payroll providers redirect Roth catch-up required participants' contributions to Roth and send them to Vanguard.
- Once the payroll provider automatically converts a participant's election to Roth, the participant may no longer be able to reduce their Roth deferral elections on Vanguard's website.
- This option requires plan sponsors to adopt deemed election, which allows pre-tax elections to be automatically converted to Roth for catch-up contributions without additional action from the participant. Plan sponsors will need to inform Vanguard of their decision to adopt deemed election in writing.
Top 5 questions from plan sponsors
Vanguard's implementation strategy seeks to minimize the impact to plan sponsors by enhancing the current contribution processing structure and limiting the need for payroll file and design changes for most clients. To identify the eligible population of Roth catch-up required participants, Vanguard is introducing a new FICA wage indicator. In early fall 2025, Vanguard will provide plan sponsors with a template on which to annually report all Roth catch-up required participants. Plan sponsors may begin transmitting this population to Vanguard through My Plan Manager™ after the last payroll of the year and before the first pay period of the new calendar year. Enrollments and distributions will be processed in the same manner as they are today.
For plans already using Vanguard's contribution monitoring service, Vanguard will flag any pre-tax contributions received from Roth catch-up required participants if the payroll provider fails to shut off their pre-tax source once they have met the 402(g) limit, creating a rejection for the excess contribution. Plan sponsors will then need to instruct Vanguard on how to reallocate or adjust the contribution amounts over the 402(g) limit via My Plan Manager reject resolution.
A proposed regulation from January 2025 clarified that plans offering catch-up contributions without a Roth contribution option can continue to do so. However, Roth catch-up required participants in these plans will not be eligible to make any catch-up contributions at all. Therefore, plan sponsors who offer catch-up contributions without a Roth contribution option will still need to track their population of Roth catch-up required participants to ensure that they do not make any catch-up contributions.
Vanguard strongly recommends that plan sponsors add a Roth contribution option. This will allow all participants to benefit from tax diversification and ensure that those required to make Roth catch-up contributions can continue doing so after January 1, 2026. The deadline for plan sponsors to add catch-up contributions with a Roth contribution option is September 1, 2025.
Plan sponsors must choose one of the two following options to comply with the Roth requirements by January 1, 2026.
Roth catch-up required participants manage their own catch-up elections: Participants in plans that choose this option will be responsible for self-managing their deferral elections, including the transition from pre-tax to Roth. Participants will need to monitor when their 402(g) contributions are maximized and potentially reset their catch-up elections each calendar year.
Payroll providers initiate automatic conversion: Payroll providers will automatically convert participants' deferral election to Roth within the payroll system. Plans sponsors who choose this option will see payroll providers redirect Roth catch-up required participants' contributions to Roth and send them to Vanguard. Deemed election is required for this option, and plan sponsors should inform Vanguard of their decision to adopt this in writing.
Vanguard is your partner in helping your participants understand how the new Roth requirements impact their catch-up contributions starting in 2026 and beyond. Throughout the remainder of 2025, as well as in 2026, Vanguard will offer resources to enhance participants' knowledge of Roth catch-up contributions.
Intranet text is now available to provide plan sponsors with educational content for internal communication channels to raise awareness about the upcoming Roth catch-up changes.
Throughout Q3, Vanguard will:
- Share drafts of upcoming participant communications.
- Remind plan sponsors to add Roth prior to the September 1, 2025, deadline.
- Publish educational and thought leadership articles about the Roth catch-up contributions requirement.
- Add new content to the Roth Catch-up Contributions Playbook: A Toolkit for Plan Sponsors.
Plan sponsors should:
- Confirm with payroll providers that required payroll changes will be in place by January 1, 2026.
- Request to add Roth to plans for January 1, 2026, no later than September 1, 2025.
Reminder: Plan amendment deadlines
Now that 2025 is underway, plan sponsors should review their plan documents to assess areas that require updates to ensure compliance now and in the years to come. At the end of 2023, IRS Notice 2024-2 extended the deadline for plan amendments relating to the CARES Act, the SECURE Act, and SECURE 2.0. Therefore, no mandatory amendments are due by the end of 2025. However, plan sponsors should decide if making certain amendments now (for example, changes from the CARES Act of 2020) would make sense for their individual plans when it comes to operations and changes already implemented. While many SECURE 2.0 provisions have already taken effect, plan sponsors may want to consider waiting to amend their plans to accommodate future provisions and further government guidance.
Vanguard will continue to share the following important deadlines with you in 2025 and beyond:
