Roth Requirements for 403(b) Catch-Up

• Alert your payroll provider of the possibility of processing contributions deemed as Roth contributions.
• Verify processes for tracking FICA wages to identify workers subject to the Roth rule.

• Review 2025 FICA wages to determine which workers may cross the $150,000 threshold (this salary limit may be adjusted annually).
• Plan to monitor yearly earnings on an ongoing basis.

Explain to identified workers about:

• How the Roth rule is starting in 2026.
• What the impact will be on their catch-up contributions.
• How Roth contributions reduce net take-home pay because income taxes will be withheld on Roth contributions.

• Explain to workers that while you will make a best effort to remit applicable catch-up contributions as Roth, if their pre-tax contributions exceed $24,500, the payroll provider will automatically convert the excess to after-tax Roth contributions unless they make a different election.
• Encourage workers to review and update their deferral elections before 2026 and remind them that they can make changes to their elections at any time throughout the year.
• Provide guidance on making or adjusting their contribution elections at ConcordiaPlans.org/CRSP.
• Have workers consider if they would prefer to make Roth contributions only after reaching the pre-tax limit or spread Roth contributions throughout the year.

Maximum contributions elected for 2026:

• Standard limit: $24,500
• Age 50+ catch-up limit: $8,000
• Total annual contribution: $32,500

Option 1 – Contribute pre-tax first, then Roth

• Contribute 100% pre-tax until the standard limit is reached (approx. 18 payroll periods for semi-monthly payroll cycle).
• Once the standard limit is met, contribute 100% Roth for remaining payrolls (approx. 6 payrolls).
• Note: This approach concentrates Roth contributions later in the year and may result in higher tax withholding and a lower net paycheck during those pay periods.

Option 2 – Distribute Roth contributions evenly

• Spread contributions across all 24 semi-monthly pay periods:
  • Pre-tax: $1,020.83 per pay period ($24,500 ÷ 24)
  • Roth (catch-up): $333.33 per pay period ($8,000 ÷ 24)
• Note: This approach provides consistent net paychecks, contributions and tax withholding throughout the year.

Consideration: Workers subject to the 2026 Roth catch-up rule (high earners 50+) will not have the choice to make catch-up contributions pre-tax. They can still choose between these two strategies for how their Roth contributions are allocated during the year. Option 1 will be automatic unless Option 2 is chosen.

Maximum contributions elected for 2026:

• Standard limit: $24,500
• Age 60–63 super catch-up limit: $11,250 (150% of the age 50+ limit)
• Total annual contribution: $35,750

Option 1 – Contribute pre-tax first, then Roth

• Contribute 100% pre-tax until the standard $24,500 limit is met (approx. 16 payroll periods).
• Once the standard limit is reached, contribute 100% Roth for the remaining eight payrolls.
• Note: Roth contributions are condensed into later pay periods, potentially increasing tax withholding and decreasing net paycheck.

Option 2 – Distribute Roth Contributions evenly

• Spread contributions across all 24 semi-monthly pay periods:
  • Pre-tax: $1,020.83 per pay period ($24,500 ÷ 24)
  • Roth (super catch-up): $489.58 per pay period ($11,750 ÷ 24)
• Note: This provides consistent net paychecks, contributions and withholding throughout the year. Option 1 will be automatic unless Option 2 is chosen.

Reminder: Starting in 2026, workers with prior-year FICA wages above $150,000 (indexed) must make all catch-up contributions (regular and super) on a Roth basis. Self-employment (SECA) wages are excluded from this threshold.