Many employers, including the federal government who offer defined contribution retirement plans such as 401(k) and 403(b) plans and the Thrift Savings Plan (TSP) are scrambling to be ready for the implementation of rule requiring highly compensated employees to make retirement plan “catch-up” contributions to the Roth account. The new rule is one of the provisions coming out of SECURE Act 2.0, which became was passed in December 2022.
The following are seven questions and answers associated with the new Roth catch-up contribution rules.
SEE ALSO: Higher TSP Catch-Up Contribution Limits for Some Participants
1. When is the Roth TSP catch-up contribution requirement effective?
The mandatory Roth TSP catch-up contribution requirement is effective January 1, 2026. The requirement was originally scheduled to be effective January 1, 2024. However, the IRS delayed implementation of the mandatory Roth TSP catch-up rule for two years after retirement plan recordkeepers complained that they did not have enough time to comply with the new rules. On September 15, 2025, the IRS issued final mandatory catch-up contribution regulations.
2. Which federal employees are affected by the mandatory Roth TSP catch-up contribution rule starting January 1, 2025?
Those federal employees who will be 50 and older as of December 31, 2026 and whose 2025 Social Security wages (Box 3 of their 2025 W-2 statement) exceeded $150,000 are affected by the mandatory Roth TSP catch-up contribution rule starting January 1, 2026.
3. Which employees are not affected by the mandatory Roth TSP catch-up contribution rule starting January 1, 2026?
Those federal employees who will be age 50 and over as of December 31, 2026, and whose 2025 Social Security wages were less than $150,000 (Box 3 of the 2025 W-2 statement) and those federal employees, age 50 and older during 2026 and hired sometime during 2026 are not affected by the mandatory Roth TSP catch-up contribution rule for 2026. The following two examples illustrate:
Example 1. Barbara, age 53, is a federal employee during 2025. Her expected taxable wages for 2025 (Box 1 of her W-2 statement) will be $133,800. Her expected Social Security wages for 2025 (Box 3 of her W-2 statement) are expected to be $142,700. Barbara is not subject to the mandatory Roth TSP catch-up contribution rule for 2026.
Example 2. Brandon, age 57, retired from private industry on December 31, 2025. He will start working for the federal government on January 12, 2026. Brandon’s 2025 Social Security wages (working for a private company) are $176,100 (maximum possible). During 2026, Brandon will not be subject to the mandatory Roth TSP catch-up contribution rule. This is because Brnadon was not a federal employee during 2025.
4. Which TSP catch-up contributions are affected by the new rule?
The mandatory Roth TSP catch-up contribution applies to employees aged 50 to 59 during 2026, and employees older than age 63 during 2026 (maximum “catch-up” contribution up to $8,000), and the “super catch-up contribution” up to $11,250 for employees who are age 60, 61, 62 and 63 during 2026. .
5. How does the new mandatory Roth TSP catch-up contribution rule apply to new federal employees?
New federal employees are not affected by the mandatory Roth TSP catch up contribution rule during their first year of federal employment – no matter the amount of their 2025 Social Security wages. That is, because they are first-year federal employees and therefore do not have any prior year (2025) wages from the federal government. In addition, these same newly hired employees during 2026 may not be affected by the mandatory Roth TSP catch-up contribution rule during their second year of employment (2027). This is because the prior year (2026) dollar threshold is not pro-rated. The following example illustrates:
Example 3. Charlotte, age 52, is hired into federal service on July 1,2026 with an annual salary of $200,000. She will not be subject to the Roth TSP catch-up contribution mandate during 2026 because she had no 2025 wages with the federal government. Assuming the 2026 Social Security wages threshold for the Roth TSP catch-up contribution limit will be $160,000, and Charlotte earns with the federal government $100,000 during the period July 1,2026 through December 31,2026, Charlotte will also be exempt in 2027 from the Roth TSP catch-up contribution requirement. This is because the $160,000 2026 prior-year dollar threshold is not pro-rated.
6. What happens when a CSRS employee is aged 50 or older (and is not subject to the Social Security FICA tax), and therefore has Social Security wages in Box 3 of their W-2 statement of $0?
Those CSRS employees who are over age 50 will be subject to the mandatory Roth TSP catch-up contributions during 2025 if their Medicare wages (Box 5 of their W-2 statement) exceed the Social Security threshold ($150,000 during 2025).
7. What is the impact if a federal employee aged 50 or older and who elects to make only Roth TSP contributions starting in January 2026?
Roth TSP deferrals made by a federal employee aged 50 or older to the Roth TSP starting immediately in early January 2026 will have those contributions count towards the mandatory Roth TSP catch-up requirement. Therefore, if a federal employee aged 50 or older who is a high-wage earner and whose Social Security wages exceeded $150,000 during 2025, is already making regular Roth TSP deferrals, then the employee’s agency cannot require Roth TSP contributions made after the $8,000/$11,250 limit has been reached.
Starting with the first pay date during 2026 after the employee contributed $8,000/$11,250 to the Roth TSP, the employee’s agency must allow the high wage earner to choose whether to continue contribute to the Roth TSP or to the traditional TSP to the traditional (before-tax) TSP. Upon the reaching early in the year the Roth catch-up contribution limit of $8,000/$11,250, the employee would is “deemed” to have met the mandatory Roth TSP catch-up contribution requirement. Essentially, this means that the TSP can mandate only Roth TSP contributions up to the dollar amount of the 2026 catch-up contributions ($8,000 or $11,250). The following example illustrates:
Example 4. Jerry, a federal employee aged 52, earned $176,100 in Social Security wages (maximum possible) during 2025. For 2026, Jerry plans to contribute the maximum possible to the TSP $24,500 regular elective deferrals plus $8,000 catch-up contributions) for a total of $32,500. Jerry is aware of the fact that because his 2025 Social Security wages exceeded $150,000 during 2025, his $8,000 catch-up contributions must go into the Roth TSP. But Jerry also wants to contribute the maximum possible to the traditional TSP during 2025 ($32,500 less $8,000 or $24,500) in order to minimize his 2026 federal and state tax liabilities and any under withholding penalties. Jerry therefore instructs his payroll processing office that starting with the first pay date in January 2026, $1,250 of his biweekly pay will be deducted and contributed to the TSP spread over 26 pay dates. Of the $1,250, for the first 10 pay dates $800 will be contributed to the Roth TSP and $450 will be contributed to the traditional TSP. Starting with the 11th pay date during 2026, Jerry can request that all $1,250 be contributed to the traditional TSP. Note that by contributing to the traditional TSP, Jerry reduces his adjusted gross income (AGI) to the extent that he may be eligible to make the maximum Roth IRA contribution for 2026 ($8,600). If Jerry is married, his spouse could also be eligible to contribute the maximum possible to a Roth IRA for 2026 ($7,500 if under age 50, $8,600 if older than age 50 during 2026). In so doing, Jerry has reduced his 2026 federal and state tax liabilities and possibly add additional monies to his and his spouse’s Roth accounts.
In short, the new Roth TSP catch-up contribution regulations present numerous challenges, including careful tracking of wages and clear TSP participant communication. The TSP service office will hopefully coordinate with all personnel and human resource offices in order to prepare for compliance and to ensure the continued success of the TSP retirement program.