SECURE 2.0 contained a provision that did not get much attention when it was passed but has consumed a lot of attention since. Beginning January 1, 2026, catch-up contributions made by “high earners” in workplace retirement plans must be made on a Roth (after-tax) basis. The rule was originally supposed to take effect in 2024, was delayed by IRS guidance to 2026, and has now arrived.
For federal employees, the rule is more impactful than for most private-sector workers, because federal salaries cluster more densely around the relevant threshold. A GS-13 or GS-14 in a high-cost area, or a senior political-appointee, can easily be above the threshold. The rule does not change whetheryou can make catch-up contributions — it changes the tax treatment of those contributions.
What the rule actually requires.
Section 603 of SECURE 2.0 amended IRC § 414(v) to require that catch-up contributions for participants whose prior-year FICA wages from the employer sponsoring the plan exceeded a specified threshold must be made on a Roth basis. The IRS issued Notice 2023-62, which delayed implementation to January 1, 2026.
For 2026, the threshold is $145,000 in FICA wages from the employer sponsoring the plan in the prior calendar year. The threshold is indexed for inflation in future years.
The relevant test is the employee’s FICA wages from the agency that sponsors the plan — in the TSP context, the federal agency employing the participant. FICA wages appear on the employee’s W-2 in Box 3. They are not the same as gross pay, basic pay, or any of the other salary figures that show up on a leave and earnings statement.
What this means in the TSP.
For federal employees above the $145,000 prior-year FICA threshold, all catch-up contributions (both the standard age-50 catch-up and the enhanced age-60-to-63 catch-up) must be designated as Roth. The TSP does not allow a high earner to direct catch-up dollars to the Traditional side.
For employees below the threshold, the rule does not change anything. They can continue to direct their catch-up contributions to Traditional or Roth as they always have.
The TSP determines threshold status based on the FICA wages reported on the participant’s W-2 for the prior calendar year. The determination is made on an annual basis, which means an employee can move in and out of Roth-only catch-up status as their compensation changes year to year.
The mechanical effects on the pay stub.
Because Roth contributions are made with after-tax dollars, the take-home pay reduction from a $1 of catch-up contribution is larger for a Roth contribution than for a Traditional one. A high earner used to directing 5% Traditional and 5% catch-up pre-tax will, in 2026, see the catch-up dollars come out of post-tax income. The net paycheck impact is greater.
The agency matching contribution is unaffected. It continues to be calculated on basic pay and continues to be deposited into the Traditional TSP balance regardless of the employee’s own contribution election.
The reactions I see most often.
High earners frequently respond to the rule in one of two ways, both of which are partly wrong.
The first reaction is to stop making catch-up contributions entirely — to avoid the higher current take-home pay hit. This is almost always the wrong answer for high earners in their 50s and early 60s, because the lost tax-deferred growth on the catch-up dollars exceeds the value of the higher current take-home pay over the long run.
The second reaction is to direct the catch-up to Roth and call it done. This is a better answer, but it ignores the interaction with the Traditional balance that already exists. A high earner who has been maxing Traditional for years may not need additional Roth dollars, and forcing the catch-up Roth may distort the overall tax diversification of the retirement portfolio.
What to actually do.
The right answer for most high earners in 2026 is a structured review:
- Confirm whether the rule applies to you, based on prior-year FICA wages on your W-2.
- Model the lifetime impact of the catch-up going to Roth instead of Traditional, against the expected marginal tax bracket at retirement.
- If the Roth catch-up makes sense (and for many high earners it does, because retirement tax brackets are likely comparable to current ones), accept the higher current take-home pay hit and continue contributing.
- If the Roth catch-up does not make sense for your specific situation, consider whether reducing your pre-tax elective deferral to make room for more catch-up Roth actually accomplishes the goal you care about.