PANDORA’S BOX EVERYTHING GOT OUT. THE HOPE IS AT THE BOTTOM. |
THE ONE-WAY DOOR The catch-up box you ticked last year can mean the opposite thing in January Earn over the wage line and the extra money goes in after tax. The regulations were finished a year ago. |
You tick pre-tax, as every year. From January your plan may read that tick as a yes to something else. |
The rule is narrow, and old enough to be forgotten. |
A 2022 retirement law said savers above a wage line must make catch-up contributions as Roth money. After tax, not before. |
Treasury and the tax authority finished the regulations on 15 September last year. Plans have to follow them from 1 January. |
The line is drawn on wages, not on income. |
More than $145,000 of prior-year wages subject to social security tax, from the sponsoring employer, indexed upward since. |
Pay from another job does not count. A spouse’s does not count. That one employer does. |
A rule about which column money lands in says nothing about what it buys. That is the block below. |
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Here is the part worth reading twice. |
A plan may treat your pre-tax election as an election to make catch-ups Roth. |
You sign nothing new. The form you filed years ago can be read the other way, if the plan document says so. |
The regulations call that a deemed election. |
| $145,000 THE WAGE LINE, BEFORE INDEXING | → | Measured on last year’s wages from the one employer sponsoring the plan. Above it, the column is chosen for you. |
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There are two ways to put a contribution back in the right column. Both belong to the plan. |
One corrects it on the wage form. The other moves the money inside the plan. |
Neither is a change of mind. |
A saver who decides in March that he wanted the deduction does not get it back. |
Tax treatment is one way a decision stops being reversible. The block below argues for another. |
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Between 60 and 63 this gets expensive. |
The same law lets savers that age put in 150 percent of the ordinary catch-up. For 2025 that was $11,250. |
So the largest catch-ups move the most money across. |
One more trap sits underneath. |
A plan with no Roth option cannot take the catch-up at all. Not as Roth, because there is nowhere to put it. Not before tax, because the law forbids it. |
The contribution simply does not happen. |
EVERY LEAD PASSES BEFORE IT RUNS The One-Way-Door Test |
01 | Can it be undone? No. The two corrections in the regulations are for the plan’s error, not yours. | |
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02 | Who is already repositioning? Plan sponsors. A deemed election has to be in the document before January. | |
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03 | What does being late cost? A year of catch-up money in the wrong column, or none at all. | |
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A retirement account is a set of rules before a set of holdings, which is the block below. |
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THE MOVE · TWO VERSIONS, PICK YOURS Ask your plan two questions before January. Does the document use a deemed Roth election, and is there a Roth source at all. If you are 60 to 63, ask a third. Whether the plan actually adopted the higher catch-up, because a general nod to the statute does not. The 2027 dollar limits are not published yet; the 2026 set came out in mid-November last year. The wage line is indexed, so the 2027 figure sits above the $145,000 in the statute. |
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ALSO GOT LOOSE TODAY | Initial jobless claims print this morning, with about 197,000 expected after 194,000. | MONEY |
| The Bank of England decides at midday London time, with a rise to 4 percent expected. | WORLD |
| Norges Bank is seen holding at 4.5 percent after September’s rise. | LATER |
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WHAT’S LEFT AT THE BOTTOM A contribution is a decision about this year. Its tax treatment decides all the rest. WE WATCH THE BOX. |
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