Internal Revenue Bulletin No. 2025–40

Executive Summary: Roth Catch-Ups Finalized

This issue of the Internal Revenue Bulletin (IRB) centers on the final regulations provided in T.D. 10033, which address the mandatory Roth catch-up contributions for high-income earners as mandated by Section 603 of the SECURE 2.0 Act of 2022. These regulations, which amend regulations under Section 414(v), which governs catch-up contributions for those age 50 and over, Section 401(k), which covers qualified cash or deferred arrangements, and Section 403(b), which applies to tax-sheltered annuity plans for certain tax-exempt organizations and public schools, finalize rules previously delayed by Notice 2023-62. The delay was implemented due to technical difficulties encountered by plan sponsors in enacting the new Roth catch-up rules. The final regulations also incorporate changes from Sections 109 and 117 of the SECURE 2.0 Act, including increased catch-up contribution limits under Section 414(v) in specific scenarios, such as the "super catch-up" for those aged 60-63. Beyond the finalized Roth catch-up regulations, this IRB also includes Notice 2025-47, which provides updated corporate bond yield curves for calculating present values under Section 417(e)(3)(D) and the 30-year Treasury rates under Section 430(h)(2)(C)(iv), and Announcement 2025-26, listing organizations that have had their Section 501(c)(3) tax-exempt status revoked for failing to meet code requirements.

Final Regs: The High-Earner Roth Mandate

The previous section discussed the final regulations impacting catch-up contributions under Section 414(v) in specific scenarios, such as the "super catch-up" for those aged 60-63. Beyond the finalized Roth catch-up regulations, this IRB also includes Notice 2025-47, which provides updated corporate bond yield curves for calculating present values under Section 417(e)(3)(D) and the 30-year Treasury rates under Section 430(h)(2)(C)(iv), and Announcement 2025-26, listing organizations that have had their Section 501(c)(3) tax-exempt status revoked for failing to meet code requirements. Turning now to T.D. 10033, this final regulation addresses Section 603 of the SECURE 2.0 Act, which introduces the 'Roth catch-up requirement'.

1. The Rule: Mandating Roth Catch-Ups for High Earners

The final regulations implement Section 414(v)(7)(A) of the Internal Revenue Code, which states that for catch-up eligible participants whose wages, as defined in Section 3121(a), exceeded $145,000 (indexed annually for cost of living) in the preceding calendar year from the employer sponsoring the plan, Section 414(v)(1) applies only if any catch-up contributions made by the participant are designated Roth contributions. This means these high-earning participants must make catch-up contributions on an after-tax basis. Section 3121(a) defines "wages" for Federal Insurance Contributions Act (FICA) purposes. In essence, these final regulations codify the Roth catch-up mandate for applicable high-income participants.

2. The Context: Transitioning from Notice 2023-62

These final regulations build upon prior IRS guidance, most notably Notice 2023-62. Notice 2023-62 provided an administrative transition period for the first two taxable years beginning after December 31, 2023. During this period, plans could treat catch-up contributions as satisfying Section 414(v)(7)(A) even if they were not designated Roth contributions. This administrative reprieve was meant to allow plan sponsors and administrators time to adapt their systems and procedures. The final regulations take effect after this transition period, setting firm requirements for compliance. The regulations are effective on November 17, 2025, and generally apply to contributions in taxable years beginning after December 31, 2026.

3. The Implication: Defining "Wages" and "Employer"

The final regulations clarify key definitions crucial for implementing the Roth catch-up requirement. "Wages" are defined by reference to the FICA taxes imposed by Sections 3101(a) and 3111(a), not Sections 3101(b) and 3111(b). This means that for the $145,000 threshold, practitioners must look to Social Security wages reported in Box 3 of Form W-2, rather than Medicare wages reported in Box 5. The IRS chose to base the definition on Box 3 to avoid unintended consequences for state and local government employees whose Medicare wages (Box 5) may be reported even if they lack Social Security coverage.

The final regulations also specify what constitutes "the employer sponsoring the plan." The general rule is that the "employer" refers to the participant's common law employer contributing to the plan. However, the final regulations provide some flexibility:

• Common Paymasters: If the common law employer uses a common paymaster in accordance with Section 3121(s), the plan may provide that the common law employer is aggregated with one or more other employers using that common paymaster. In this case, wages from all aggregated employers are considered.
• Controlled Groups: Similarly, if the common law employer is a member of a controlled group of employers under Section 414(b), (c), (m), or (o), the plan may provide for aggregation of the common law employer with other group members, again treating the aggregated entities as a single employer. Section 414(b) defines a controlled group as a parent-subsidiary or brother-sister group under common control. Section 414(c) applies similar principles to organizations under common control, whether or not incorporated. Section 414(m) addresses affiliated service groups. Section 414(o) gives the IRS authority to prescribe regulations to prevent avoidance of employee benefit requirements.

These aggregation options allow practitioners to align Roth catch-up eligibility determinations with their existing payroll practices, easing administrative burdens while still adhering to the intent of the SECURE 2.0 Act.

Operational Mechanics: Deemed Elections & Corrections

The previous section detailed how the final regulations allow practitioners to align Roth catch-up eligibility determinations with their existing payroll practices, easing administrative burdens while still adhering to the intent of the SECURE 2.0 Act. The final regulations also address the operational aspects of implementing the Roth catch-up requirement, specifically addressing deemed Roth elections and correction methods for errors.

One key element of T.D. 10033 involves "deemed" Roth elections. The regulations permit plans to implement a feature where participants subject to the Roth catch-up requirement are automatically enrolled in Roth contributions. This is provided they have an "effective opportunity," under §1.401(k)-1(e)(2)(ii), to opt out or make a different election. Section 401(k) governs qualified cash or deferred arrangements, and is crucial for understanding elective deferrals.

The IRS has clarified that plans must cease applying the deemed Roth election within a reasonable timeframe after either: (1) the employee ceases to be subject to the Roth catch-up requirement (e.g., due to a change in compensation), or (2) an amended Form W-2 is filed indicating the employee does not meet the income threshold. Catch-up contributions already designated as Roth contributions before this reasonable period do not need to be recharacterized as pre-tax. This approach balances administrative simplicity with participant choice and responsiveness to updated information.

The final regulations also introduce two new correction methods for addressing errors in implementing the Roth catch-up rules:

1. Form W-2 Correction: The plan can transfer the pre-tax elective deferral (adjusted for allocable gains or losses using §1.402(g)-1(e)(5)) to the participant's designated Roth account. The contribution (without adjustment for gains/losses) is then reported as a Roth contribution on the participant's Form W-2 for the year of the deferral. This method is not allowed if the Form W-2 has already been filed or furnished to the participant. Section 402(g) is the annual limit on elective deferrals, and understanding its correction methods is critical here.

2. In-Plan Roth Rollover: The plan directly rolls over the pre-tax elective deferral (adjusted for gains/losses using §1.402(g)-1(e)(5)) from the participant's pre-tax account to their Roth account. This rollover is reported on Form 1099-R for the year of the rollover. This follows the parameters set out by Section 402A(c)(4)(E). Section 402A addresses Roth contributions, including in-plan rollovers. The in-plan Roth rollover used as a correction can only be done by a plan and may not be elected voluntarily by a participant.

T.D. 10033 offers relief for "de minimis" errors. No correction is needed if the pre-tax elective deferral that should have been designated Roth does not exceed $250. Additionally, no correction is required if the participant only became subject to the Roth catch-up requirement after the correction deadline due to a late wage adjustment. These provisions recognize the practical limitations of perfectly administering complex tax rules.

Universal Availability & Higher Age Limits

...n and may not be elected voluntarily by a participant.

T.D. 10033 offers relief for "de minimis" errors. No correction is needed if the pre-tax elective deferral that should have been designated Roth does not exceed $250. Additionally, no correction is required if the participant only became subject to the Roth catch-up requirement after the correction deadline due to a late wage adjustment. These provisions recognize the practical limitations of perfectly administering complex tax rules.

The final regulations also address various aspects of the enhanced catch-up contribution limits introduced by the SECURE 2.0 Act, specifically Sections 109 and 117.

Age 60-63 Catch-Up Boost

Section 109 of the SECURE 2.0 Act amended IRC Section 414(v), which allows participants aged 50 and older to make catch-up contributions to qualified retirement plans. The change introduced a higher catch-up limit for those attaining ages 60, 61, 62, or 63 during the taxable year. The limit is set at the greater of $10,000 or 150% of the standard catch-up limit. As the 2024 standard catch-up limit was $7,500, the 150% figure becomes $11,250. The final regulations do not extend eligibility for this increased limit beyond age 63. Therefore, after age 63, participants revert to the standard catch-up limits applicable to those age 50 or older.

SIMPLE Plan Enhancements

Section 117 provides an increased applicable dollar catch-up limit under IRC Section 414(v)(2)(B)(ii) for SIMPLE plans sponsored by certain eligible employers as defined in IRC Section 408(p)(2)(E)(iv). This provision effectively increases the catch-up limit to 110% of the otherwise applicable limit. Note that this SIMPLE plan increase is distinct from the 150% "Super Catch-up" for ages 60-63. The regulations clarify that a SIMPLE plan cannot provide for an applicable dollar catch-up limit that reflects increases under both Sections 109 and 117 of the SECURE 2.0 Act simultaneously. However, a SIMPLE plan can allow participants aged 60-63 to contribute the 150% amount instead of the standard 110% increase.

Universal Availability Exception: The 'No Roth' Safe Harbor

The final regulations address concerns about the "universal availability" requirement under IRC Section 414(v)(4) and existing Treasury Regulation 1.414(v)-1(e)(1)(i), which mandates that if a plan offers catch-up contributions, it must offer them to all eligible participants. A critical exception is created for plans without a qualified Roth contribution program (as defined in IRC Section 402A(b), concerning designated Roth contributions).

Specifically, a plan without a Roth program can exclude high earners (those subject to mandatory Roth catch-ups) from making any catch-up contributions without violating the universal availability rules. This provision acts as a "safe harbor," enabling plans to avoid complex nondiscrimination testing that might otherwise arise if only lower-income participants could make catch-up contributions. However, to leverage this safe harbor, a plan cannot allow any participant subject to mandatory Roth contributions (due to their income) to make any catch-up contributions. This exception helps plans avoid failing benefits, rights, and features testing under IRC Section 401(a)(4). In response to comments received and as explained in section III.B.1. of this preamble, the final regulations reduce the potential administrative bur‑ den of this requirement by removing the requirement that a plan take into account any designated Roth contributions that a participant made earlier in a calendar year for purposes of applying the deemed Roth catch-up election.

Yield Curves & Revocations

Continuing from the final regulations that reduce the potential administrative burden of accounting for designated Roth contributions made earlier in the year, the IRS also released guidance regarding applicable interest rates and changes to organizations eligible to receive deductible contributions. This exception helps plans avoid failing benefits, rights, and features testing under IRC Section 401(a)(4). Section 401(a)(4) ensures that contributions or benefits provided under a retirement plan do not discriminate in favor of highly compensated employees.

Notice 2025-47 provides updated guidance on corporate bond yield curves and segment rates as they relate to defined benefit plan funding. The notice updates the corporate bond monthly yield curve, corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2). Section 417(e)(3) governs the present value of certain forms of benefit, like lump-sum distributions, and mandates the use of specific interest rates. Section 430 dictates the minimum funding requirements for single-employer defined benefit plans under Section 412, and Section 430(h)(2) specifies the interest rates used to determine a plan's target normal cost and funding target. The notice includes 24-month average segment rates, which can be adjusted based on applicable percentages of the 25-year average segment rates. For plan years beginning in 2026, the 25-year averages for the period ending September 30, 2025, are 3.22%, 5.00%, and 5.70% for the first, second, and third segment rates, respectively. The notice also provides the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I). Section 431 pertains to the minimum funding requirements for multiemployer plans under Section 412.

Announcement 2025-26 lists organizations whose 501(c)(3) status has been revoked. Section 501(c)(3) describes organizations exempt from federal income tax because they are organized and operated for religious, charitable, scientific, or other purposes. This revocation impacts the deductibility of contributions made to these organizations under Section 170(c)(2). Generally, the IRS will not disallow deductions for contributions made on or before the date of the announcement. However, deductions can be disallowed for contributions made after the revocation if the organization has not timely filed a suit for declaratory judgment under Section 7428, and the contributor (1) had knowledge of the revocation, (2) was aware that such revocation was imminent, or (3) was responsible for the activities that brought about the revocation. Section 7428 provides a procedure for organizations to seek a declaratory judgment regarding their tax-exempt status. The announcement lists the names of the organizations and the effective date of revocation; for example, the National Coalition For Housing Opportunities Inc. in Winchester, VA, had its status revoked effective January 1, 2021.