New Roth catch-up contribution requirement begins in 2026
IU’s supplemental retirement plans—the IU TDA and IU 457(b) plans—currently allow employees age 50 or older to make voluntary “catch-up” contributions above the standard IRS limits. A new provision under the SECURE 2.0 Act is changing how some employees must make these catch-up contributions starting in 2026.
Beginning Jan. 1, employees aged 50 or older who earned more than $150,000 in FICA wages in the prior year (reported in Box 3 of their 2025 W-2) and opt to make catch-up contributions will be required to make all catch-up contributions as Roth (after-tax).
This change only applies to catch-up contributions. Regular contributions are not affected and may continue to be made on either a pre-tax or after-tax (Roth) basis. If your prior year FICA wages were $150,000 or less, you can make catch-up contributions as pre-tax, after-tax (Roth), or a combination of both.
Who is affected by this change?
This new provision may apply to you if all of the following apply:
You will be age 50 or older in 2026, and
Your prior-year FICA wages exceeded $150,000, and
You opt to make catch-up contributions to the IU TDA or IU 457(b).
Only a small number of IU employees are expected to meet both criteria. Those individuals will receive direct communications from IU Human Resources and Fidelity with additional details.
What this can mean for participants
A Roth contribution means that taxes are taken out before it is contributed to the plan. That contribution grows tax deferred, and any eligible withdrawal—once the account has been open for five years and you’ve met certain plan distribution requirements—will be tax-free, including earnings. Learn more about the Roth option at IU.
If you meet the criteria for this new rule, the plan will automatically designate any catch-up contributions you make as Roth. This is known as a deemed Roth catch-up contribution.
Keep in mind that you may opt out of this, for instance by choosing to not make catch-up contributions. You can change or stop your contributions, including opting out of catch-up contributions, at any time through the Employee Center.
What you should consider next
Now is a great time to talk to a financial or tax advisor about how Roth catch-up contributions can fit into your retirement strategy. IU’s dedicated Fidelity Workplace Financial Consultants can provide no-cost, one-on-one guidance on your options. Call +1-800-642-7131 or use the online scheduling tool to make an appointment.
Additional details
The SECURE 2.0 Act was passed to strengthen retirement savings. One provision requires higher-income earners to make catch-up contributions on a Roth basis to increase tax diversification.
The provision applies to the IU TDA and the IU 457(b) supplemental retirement plans.
The $150,000 threshold is based on FICA Social Security wages (Box 3 on Form W-2), not gross income or taxable income. Employment from other organizations or affiliated entities are not part of the calculation.
Catch-up contributions allow participants aged 50 and older to contribute extra amounts beyond the standard annual limit of $24,500.
For 2026, the catch-up limit is $8,000.
For ages 60–63, an enhanced limit of $11,250 applies.
Roth contributions do not reduce your taxable income in the year you contribute. However, future withdrawals (subject to IRS rules) are tax-free, which can be beneficial for long-term planning.
Under the new regulations, plans can “apply the deemed election”, meaning they can convert a participant’s pre-tax catch-up election to an after-tax Roth contribution for participants who are subject to the requirement under the following circumstances:
After the participant’s total elective deferrals and Roth contributions made during the calendar year reach the 402(g) limit; or
After the participant’s pre-tax elective deferrals made during the calendar year reach the 402(g) limit; or
For separate election plans an additional option is that all catch-up elections may be deemed Roth at the start of the calendar year.
With a deemed Roth election, participants are given the opportunity to make a new election that is different from the deemed election. If you meet the criteria, you will be notified once you reach the standard contribution limit for 2026. If you take no action, IU will change any further contributions to Roth.
No, the provision only applies to employees who were employed with IU the previous tax year. It is possible this could affect you in a future year, but not your first year of employment at IU.
Yes. If you leave IU in 2025 (term, retire, etc.), have a break and service, and return to work at IU in 2026, this provision will apply if you meet all the criteria.
No, only IU wages count when calculating who is required to make Roth catch-up contributions. Wages from IU Health are not counted for the provision.
