New 401(k) and SIMPLE Contribution Rules for 2026

Every year brings new retirement contribution numbers, but 2026 brings something bigger: a real structural change to how catch-up contributions work for higher-earning employees. This isn’t just a business-owner issue — it can affect you directly as an employee, your spouse if they work elsewhere, or your own employees. If you have a 401(k) or SIMPLE plan in the picture anywhere in your household, this is worth five minutes of your attention.

The Big Change: Roth Catch-Up Contributions Mandatory for High Earners

Starting January 1, 2026, if you’re age 50 or older and earned more than $150,000 in FICA wages from an employer in 2025, any catch-up contributions you make to a 401(k), 403(b), or governmental 457 plan must be made as Roth (after-tax) — not pre-tax. This applies to both the standard catch-up and the larger “super catch-up” available to those age 60–63.

There’s real teeth to this rule: if a plan doesn’t offer a Roth contribution option, it legally can’t accept catch-up contributions at all from anyone who crosses that $150,000 threshold. So plans that only offer pre-tax catch-up contributions need to either add a Roth feature or cut off catch-up eligibility for their higher-paid employees.

The IRS is allowing a “reasonable, good-faith compliance” standard through 2026, with full enforcement starting in 2027 — but the rule itself is effective now.

Does This Apply to You?

It depends on how the wages are paid — not on who owns the business. This is the part that trips people up, and it’s especially relevant for our clients, because the rule is built entirely around FICA wages — meaning W-2 wages subject to Social Security and Medicare withholding. If a person doesn’t receive FICA wages, the rule doesn’t apply to them, no matter their income level. But that test is about the individual paycheck, not about who owns the company — so it can reach further into your household or your business than you’d expect.

Here’s how that plays out:

• S-corp owner-employees: You take a W-2 salary from your S-corp, and that salary counts as FICA wages. If your 2025 W-2 wages were above $150,000, you’re subject to the mandatory Roth catch-up rule in 2026.
• Partners in a partnership (including multi-member LLCs taxed as partnerships) and sole proprietors/single-member LLCs: Your own business income is self-employment income, not FICA wages, so this rule doesn’t apply to that income — regardless of how much you earn. But don’t stop there:
  • Your spouse: If your spouse works elsewhere as a W-2 employee and earns over $150,000, this rule applies to them directly, even though it doesn’t apply to you.
  • Your employees: If your business has W-2 employees who cross the $150,000 threshold, the rule applies to them individually — your own tax status as a partner or sole proprietor doesn’t shield your payroll from this.

The bottom line: this rule follows the paycheck, not the ownership structure. A business owner might be personally exempt while their spouse, their key employee, or their ops manager down the hall is squarely affected. The simplest test for any individual is: do they get a W-2 with FICA withholding, or a K-1/Schedule C? That answer tells you whether the rule is something to plan around for that specific person.

Other 2026 Numbers to Know

The IRS also raised standard contribution limits for 2026 (Notice 2025-67):

• 401(k)/403(b)/governmental 457 employee deferral limit: $24,500 (up from $23,500)
• Standard catch-up, age 50+: $8,000 (up from $7,500)
• Super catch-up, ages 60–63: $11,250 (unchanged from 2025)
• SIMPLE IRA/SIMPLE 401(k) deferral limit: $17,000 (up from $16,500)
• SIMPLE catch-up, age 50+: $4,000 (up from $3,500)
• SIMPLE super catch-up, ages 60–63: $5,250 (unchanged)

Next Steps

If this rule applies to you or someone in your household — whether that’s your own W-2 wages, your spouse’s job, or an employee on your payroll — there’s a real tax consequence worth planning for: catch-up contributions that used to reduce your taxable income will now be taxed in the year you contribute them. That’s a current-year tax bill you may not be expecting if you’ve budgeted around the old pre-tax deduction.

It’s worth checking now, before year-end deferral elections are finalized:

• If you’re an S-corp owner or W-2 employee near or above $150,000, confirm your plan offers a Roth catch-up option and plan for the added taxable income.
• If you’re a partner or sole proprietor, this doesn’t apply to your own business income — but check whether it applies to your spouse or to any employees on your payroll.

Not sure which category applies to you, your spouse, or your team? Contact TrueBlaze — we’re happy to walk through your specific situation.