Roth catch-up is close. It does not touch the cash balance credit.

From the day the Internal Revenue Service posted the 2026 limits, November 13, until the day the Roth catch-up rule becomes operational, January 1, 2026, is seven weeks. This briefing is dated December 7, 2025. The middle of that window is already gone. Calling the project a six-week job was fair in mid-November. It is not fair to spend another quiet week and then discover, over the holidays, that the 401(k) document has no Roth feature and payroll cannot tell a catch-up from a regular deferral. The rule is not in force today. It is close enough that the setup work has to be identified now.

Sterling Pension Group is a third-party administrator. We are not an actuarial firm, and we are not the 401(k) recordkeeper. An independent Enrolled Actuary certifies pension numbers. The Roth catch-up rule is not a pension number. This briefing is not tax, legal, or actuarial advice. It is a separation of two ideas that vendor emails are about to staple together.

What actually changes on January 1

Catch-up contributions are the deferrals a participant age 50 or older may make above the regular elective deferral limit. For 2026, under IR-2025-111 and Notice 2025-67, the regular deferral limit is $24,500. The ordinary catch-up is $8,000. The higher catch-up for ages 60, 61, 62, and 63 remains $11,250. Those amounts were announced on November 13. They take effect January 1, 2026. They are not the amounts that govern a deferral from 2025 wages. The 2025 deferral limit remains $23,500, the 2025 ordinary catch-up remains $7,500, and the 2025 age 60 through 63 catch-up is the same $11,250.

Beginning January 1, 2026, a catch-up contribution has to be a Roth contribution if the participant's FICA wages from the employer sponsoring the plan for the preceding calendar year were over $150,000. The preceding year, for a 2026 catch-up, is 2025. The rule was delayed through 2025. A catch-up withheld this month can still be pre-tax if the participant elected pre-tax and the plan allows it. On the first 2026 payroll, the wage test turns on for people who meet it.

"Over $150,000" means more than that figure, not that figure itself. The wages are FICA wages from the sponsoring employer, generally the Social Security wages reported for that employer, not household income, not K-1 income, not investment income, and not the plan's compensation cap. The compensation cap for 2026 is $360,000. The 2025 compensation cap, which still governs 2025 plan work, is $350,000. Neither cap is the Roth catch-up test. The highly compensated employee threshold is a third number, used for nondiscrimination testing. A person can be highly compensated and still fall outside the Roth catch-up rule, or the reverse, depending on which employer's FICA wages are counted. The IRS COLA page is where the limit tables live. It will not compute anyone's W-2.

The wage test looks at the employer that sponsors the plan. Wages from a previous employer are not automatically included. Wages are not annualized if someone was hired mid-year. Only actual FICA wages from the sponsor count. If you operate through more than one entity, do not assume the payrolls combine, and do not assume they stay separate. Aggregation is a question for the 401(k) provider and the CPA under the guidance, especially where a common paymaster or a related employer is in the picture. It is not a question to settle by adding two W-2s on a notepad and hoping.

Who is inside the rule, and who may not be

This briefing is written for self-employed owners, and self-employed is not one tax classification. A partner and a sole proprietor often have no FICA wages from the sponsoring employer. They have net earnings from self-employment, which are subject to self-employment tax, and self-employment tax is not the same statute as FICA wages under section 3121(a). Partners and sole proprietors without those FICA wages are often outside the mandatory Roth catch-up rule entirely. That is a structural fact, not a loophole you should invent paperwork to enlarge. If you later become a W-2 employee of a corporation that sponsors the plan, the fact can change.

An S corporation owner who takes W-2 wages is in a different seat. If those wages for 2025 are over $150,000, the owner's 2026 catch-up contributions to the 401(k) generally have to be Roth. The same is true of any employee of that corporation, including an associate or a spouse on payroll, whose own FICA wages from the sponsor clear the threshold. Owners who have kept W-2 wages deliberately low, and taken the rest as distributions, may find that the low wage keeps them under the threshold. That observation is not advice to cut a salary. Compensation has to be reasonable, the pension formula depends on real plan compensation, and the CPA is the person who will refuse a salary that was built backward from a Roth test.

If the plan does not offer a Roth deferral feature, a participant who is subject to the rule generally cannot make a catch-up contribution at all. The plan may still allow catch-ups for everyone else. The practical choice, if you want the affected participant to use the $8,000 or the $11,250, is to add Roth and to make payroll able to honor it. Some plans will use a deemed election, so that a catch-up that would have been pre-tax is treated as Roth once the dollar limit is crossed, without a fresh form from the participant in the middle of a pay period. Whether your document and your payroll system can do that is a provider question. It is a December question. It is a bad question for January 2.

The dollars involved are the catch-up, not the entire deferral. A participant who is subject to the rule may still defer the regular $24,500 on a pre-tax basis in 2026 if the plan allows pre-tax deferrals. Only the catch-up slice has to be Roth. For someone using the ordinary catch-up, that slice is $8,000. For someone age 60 through 63, it is $11,250. Those are meaningful tax differences — Roth is after-tax, so the deduction the owner was used to taking for the catch-up goes away — and they are not the pension.

What the rule does not touch

A cash balance pay credit is an employer contribution under a defined benefit formula. It is not an elective deferral. It is not a catch-up. It does not become Roth because the owner's FICA wages exceeded $150,000. It is not reported as a deferral on the W-2. Changing the pension interest crediting rate, freezing the cash balance plan, or accelerating a 2025 deposit will do nothing useful about this rule. If a recordkeeper's December bulletin tells you to "review your retirement plan contributions for Roth," read it as a 401(k) sentence until someone shows you a sentence that is actually about the pension.

The defined benefit dollar limit for 2026 is $290,000 of annual benefit, not of catch-up. The 2025 benefit limit remains $280,000 for 2025 work. The IRS explains the benefit limit on its limits page. None of that page is a Roth election. The defined contribution annual-additions limit for 2026 is $72,000, and catch-up sits outside it. A Roth catch-up and a pre-tax catch-up count the same way against the catch-up ceiling. The tax character changes. The room does not.

A combo still has two plans after January 1. The 401(k) side has to be able to administer Roth catch-up for the people the wage test catches. The cash balance side has to be funded and valued as before. The CPA has to be told which dollars were Roth, because a Roth catch-up is not deductible to the participant, and an employer cash balance contribution generally is deductible to the employer within the certified limit. Mixing those on one line is how a correct plan produces an incorrect return. Publication 560 will not map the boxes for you. Your payroll reports will, if they are set up in time.

Staff follow the same wage test, one person at a time. A nurse, an associate, or a spouse with FICA wages over $150,000 from the sponsor is in the rule even if the owner, through a partnership structure, is not. A staff member under the threshold may keep a pre-tax catch-up. The 401(k) provider has to be able to split the population. A single switch that forces every catch-up in the plan to Roth is a design choice, not a requirement, and it may be the wrong choice if most employees are under the threshold and value the pre-tax deduction. Ask before you accept a default that the payroll system found easiest.

What has to be true before the first 2026 payroll

The document needs a Roth deferral provision if any participant who is over the wage threshold is going to make a catch-up. Adding that provision is an amendment, and amendments have adoption procedures, signature rules, and, depending on the provider, a queue that does not run on Sundays in late December. Ask this week whether Roth is already in the adoption agreement. If it is, ask whether it is turned on in payroll or merely available on paper. Paper Roth that payroll cannot withhold is not compliance.

Payroll needs the 2025 FICA wage figure for each participant who might catch up, from this employer, and a code that applies the test without waiting for a W-2 that will not be filed until January. Box-level wages can be known from the payroll register before the form is printed. Ask which wage definition the system will use, and ask them to reconcile it to the regulatory definition rather than to Medicare wages or to federal income-tax wages if those differ. A threshold error in either direction is a real error. Someone at $150,000 exactly is not over the threshold. Someone at $150,001 is.

The participant communication is part of the job even when a deemed election will do the mechanics. People who have always had a pre-tax catch-up will see a smaller net paycheck or a different tax withholding pattern when that slice becomes Roth. They should hear it from the plan, not from the first pay stub of January. The safe harbor notice rules, if your plan uses a match safe harbor, are a separate calendar and may already have passed for a 2026 match notice. Do not bury a Roth explanation inside a notice you can no longer give, and do not skip the explanation because the safe harbor notice was already mailed. Administration is the discipline of keeping those workstreams labeled.

Nothing in this rule extends a filing deadline or a funding deadline. Form 5500 for a calendar-year plan is still generally due July 31, with an extension to October 15, as described in the IRS Form 5500 corner and the Department of Labor's filing page. Minimum funding for a calendar-year cash balance plan is still generally due September 15 of the following year. PBGC coverage is still plan-specific. The coverage guidance does not mention Roth catch-up, because coverage is not a deferral question. If a December to-do list has only one line that says "retirement," split the line.

The 2026 limits and this Roth rule are announced and scheduled. Neither is a reason to rewrite a 2025 cash balance credit in the last weeks of the year. If you are still deciding whether a pension fits, decide it on the census and the certified range, under the limits that apply to the year you mean. A Roth catch-up of $8,000 or $11,250 is real money. It is not the layer a cash balance plan exists to provide. Treating it as the main event of December will crowd out the funding and design questions that are actually larger.

What to do in the next two weeks

Ask the 401(k) provider four questions in one email. Does the document already permit Roth deferrals? Can payroll treat catch-up contributions as Roth, including by a deemed election, starting with the first pay date in January 2026? Which 2025 wage figure will be used for the $150,000 test, and who at the provider is responsible for participants over that line? What happens to a participant who is over the line if Roth is not ready — are their catch-ups blocked, or will the system incorrectly take them pre-tax?

Separately, write down whether you personally have FICA wages from the sponsoring employer. If you are a partner or a sole proprietor without those wages, say that to the CPA and ask them to confirm you are outside the rule, rather than assuming a blog post settled it. If you are an S corporation owner, pull the 2025 wage register now. Do not amend the cash balance formula in response. Send us the provider's answers if a pension and a 401(k) have to stay coordinated through the change. Two weeks from today is December 21. That is a poor day to discover that Roth was never in the document.