§ 1.414(v)-2. Catch-up contributions required to be designated Roth contributions under section 414(v)(7).

¶(i) Plans without qualified Roth contribution programs. If an applicable employer plan is described in paragraph (b)(2) of this section, then § 1.414(v)-1(d)(4) does not apply to the plan. As a result, a plan that has one or more highly compensated employees (as defined in section 414(q)) who are not subject to the Roth catch-up requirement under paragraph (a)(2) of this section may need to provide that one or more of those highly compensated employees is not permitted to make catch-up contributions in order to facilitate satisfaction of § 1.401(a)(4)-4 with respect to the availability of catch-up contributions. For this purpose, a plan will be deemed to satisfy § 1.401(a)(4)-4 with respect to the availability of catch-up contributions if the plan provides that no catch-up eligible participants who are highly compensated employees with net earnings from self-employment for the preceding calendar year from the employer sponsoring the plan above the Roth catch-up wage threshold are permitted to make catch-up contributions. A plan is not treated as failing to satisfy the universal availability requirement of § 1.414(v)-1(e) merely because the plan precludes one or more highly compensated employees from making catch-up contributions in accordance with the second sentence of this paragraph (b)(3)(i) or precludes all catch-up eligible participants who are highly compensated employees with net earnings from self-employment for the preceding calendar year from the employer sponsoring the plan above the Roth catch-up wage threshold from making catch-up contributions.

¶(ii) Plans limiting pre-tax catch-up contributions for employees not subject to section 414(v)(7). The rules of paragraph (b)(3)(i) of this section also apply to a plan that includes a qualified Roth contribution program and, in accordance with an optional plan term providing for aggregation of wages under § 1.414(v)-2(b)(4)(ii), (b)(4)(iii), or (b)(4)(iv)(A), does not permit pre-tax catch-up contributions for one or more employees who are not subject to section 414(v)(7).

¶(i) General rule. Except as provided in paragraphs (b)(4)(ii) and (iii) of this section, and subject to paragraphs (b)(4)(iv) and (v) of this section, for purposes of determining the employer sponsoring the plan with respect to a catch-up eligible participant, the employer is the participant's common law employer.

¶(ii) Optional aggregation for employers using a common paymaster. If the employer described in paragraph (b)(4)(i) of this section uses a common paymaster in accordance with section 3121(s), then the plan may provide that the employee's common law employer is aggregated with one or more other specified employers using that common paymaster and treat the aggregated employers as a single employer sponsoring the plan for purposes of section 414(v)(7) and this section. In such a case, the employee's wages from the common law employer and from the one or more other employers that are aggregated with the common law employer are treated as wages from the employer sponsoring the plan.

¶(iii) Optional aggregation for other controlled group members. If the employer described in paragraph (b)(4)(i) of this section is a member of a group of employers that are treated as a single employer under the rules of section 414(b), (c), (m), or (o), then the plan may provide that the employee's common law employer is aggregated with one or more other specified employers in that group of employers and treat the aggregated employers as a single employer sponsoring the plan for purposes of section 414(v)(7) and this section. In such a case, the employee's wages from the common law employer and from the one or more other employers that are aggregated with the common law employer are treated as wages from the employer sponsoring the plan.

¶(iv) Optional aggregation in the year of an asset purchase. The following optional provisions apply for a calendar year for which wages paid to an employee by a predecessor employer are attributed to the employee's common law employer who is a successor employer in accordance with § 31.3121(a)(1)-1(b) of this chapter:

¶(v) Disregarded entities. In the case of an employee who receives wages from an entity that is disregarded as an entity separate from its owner in accordance with § 301.7701-2(c)(2)(i) of this chapter (that is, the entity has not made an election under § 301.7701-3(b)(1)(ii) of this chapter to be classified as a corporation), the owner is treated as the employer sponsoring the plan for purposes of applying this paragraph (b)(4). In such a case, the employee's wages from the employer sponsoring the plan include the employee's wages from the disregarded entity and from its owner.

¶(i) A catch-up eligible participant's wages for the calendar year preceding the calendar year in which the taxable year begins from one employer sponsoring the plan are not aggregated with the wages from another employer sponsoring the plan for purposes of determining whether the participant's wages for that preceding calendar year exceeded the Roth catch-up wage threshold in paragraph (a)(2) of this section; and

¶(ii) Even if a catch-up eligible participant's wages for the calendar year preceding the calendar year in which the taxable year begins from an employer sponsoring the plan exceeded the Roth catch-up wage threshold in paragraph (a)(2) of this section, elective deferrals made from the participant's compensation from another employer sponsoring the plan that are catch-up contributions are required to be designated Roth contributions only if the participant's wages for that preceding calendar year from that other employer also exceeded that wage threshold.

¶(i) The failure to be a designated Roth contribution is corrected in accordance with paragraph (c)(2) of this section; or

¶(ii) No correction is required under the rules of paragraph (c)(4) of this section.

¶(i) In general. For purposes of this paragraph (c), if an elective deferral that exceeds a statutory limit, employer-provided limit, or ADP limit (as such terms are defined in § 1.414(v)-1(b)(1)) fails to be a catch-up contribution under section 414(v)(1) solely because the elective deferral is not a designated Roth contribution, then the failure to satisfy section 414(v)(7) is referred to as a “section 414(v)(7) failure.” In such a case, subject to paragraph (c)(3) of this section, the section 414(v)(7) failure may be corrected in accordance with this paragraph (c)(2). A plan may provide for either of the correction methods described in paragraphs (c)(2)(ii) and (iii) of this section, but must apply the same correction method for similarly situated participants, and the selection of which correction method applies may not be based on the investment returns earned in participants' accounts. For example, a plan may provide that a section 414(v)(7) failure is corrected using the correction method described in paragraph (c)(2)(ii) of this section for all participants for whom the Forms W-2 for that year have not been filed or furnished and is corrected using the correction method described in paragraph (c)(2)(iii) of this section for all other participants.

¶(ii) Permitted correction on Form W-2. A plan may correct a section 414(v)(7) failure by transferring the catch-up contribution (adjusted for earnings and losses in accordance with § 1.402(g)-1(e)(5)) from the participant's pre-tax account to the participant's designated Roth account and reporting the contribution (not adjusted for earnings and losses) as an elective deferral that is a designated Roth contribution on the participant's Form W-2 for the year in which the elective deferral was originally excluded from the participant's gross income. However, this correction method may be used only if the participant's Form W-2 for that year has not been filed or furnished to the participant.

¶(iii) Permitted correction by in-plan Roth rollover. As an alternative to the correction method permitted under paragraph (c)(2)(ii) of this section, a plan may correct a section 414(v)(7) failure by directly rolling over the elective deferrals that would be catch-up contributions if they had been designated Roth contributions (adjusted for earnings and losses in accordance with § 1.402(g)-1(e)(5)) from the participant's pre-tax account to the participant's designated Roth account. Under this correction method, the rules of section 402A(c)(4)(E)(ii) and (iii) will apply and the direct rollover must be reported as such on Form 1099-R (Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) for the year of the rollover.

¶(i) Practices and procedures designed to avoid section 414(v)(7) violations—

¶(ii) Reliance on Form W-2. A plan sponsor or plan administrator does not fail to have in place practices and procedures in accordance with paragraph (c)(3)(i) of this section merely because a plan determines the applicability of the section 414(v)(7)(A) Roth catch-up requirement to a participant on the basis of a timely-filed Form W-2 with respect to the participant.

¶(iii) Deadlines for corrections of section 414(v)(7) failures under paragraph (c)(2) of this section—

¶(i) De minimis section 414(v)(7) failures. A section 414(v)(7) failure with respect to a participant does not need to be corrected if the amount of the pre-tax elective deferral that was required to be a designated Roth contribution does not exceed $250. In such a case, the section 414(v)(7) failure is disregarded, and the elective deferral is treated as a catch-up contribution.

¶(ii) Failures attributable to an amended Form W-2. A section 414(v)(7) failure with respect to a participant does not need to be corrected if the participant became subject to section 414(v)(7)(A) solely because the participant's wages taken into account under paragraph (a)(2) of this section for the calendar year preceding the calendar year in which the taxable year begins were not determined to exceed the Roth catch-up wage threshold until after the deadline for correction in paragraph (c)(3)(iii) of this section. In such a case, the section 414(v)(7) failure is disregarded, and the elective deferral is treated as a catch-up contribution.

¶(i) Facts. In January 2026, Participant A became an employee of an accounting firm that is structured as a partnership. Through October 2026, A had $156,000 of FICA wages from the accounting firm. In November 2026, Participant A became a partner in the accounting firm, and, for 2026, Participant A had a $30,000 distributive share of partnership income from the accounting firm, all of which was self-employment income. Participant A is a partner with the accounting firm for all of 2027.

¶(ii) Analysis. Although Participant A is a partner with the accounting firm for the last two months of 2026 and for all of 2027 (and thus has self-employment income rather than FICA wages for that period), Participant A had more than $155,000 in FICA wages from the accounting firm for 2026. Thus, Participant A is subject to section 414(v)(7)(A) for 2027, and if Participant A makes elective deferrals in excess of an applicable limit for 2027 under a plan sponsored by the accounting firm, those elective deferrals must be designated Roth contributions.

¶(i) Facts. The facts are the same as in paragraph (d)(1) of this section (Example 1), except that Participant A became a partner of the accounting firm in May 2026, and had FICA wages from the firm of $60,000 before becoming partner. In addition, for 2026, Participant A had a $155,000 distributive share of partnership income from the accounting firm, all of which was self-employment income.

¶(ii) Analysis. Although Participant A had total compensation of $215,000 for the services Participant A performed for the accounting firm in 2026, only $60,000 of that amount were FICA wages. Because Participant A did not have more than $155,000 of FICA wages from the accounting firm for 2026, any elective deferrals in excess of an applicable limit that Participant A makes for 2027 under a plan sponsored by the accounting firm are not required to be designated Roth contributions.

¶(i) Facts. Participant B participates in an applicable employer plan sponsored by Employer E. The plan year begins on July 1 and ends on June 30. Participant B had $160,000 in wages within the meaning of section 3121(a) from Employer E for calendar year 2026, and is a catch-up eligible participant for calendar year 2027. For the plan year beginning July 1, 2026, the plan allows all catch-up eligible participants to make catch-up contributions and requires that any elective deferrals in excess of an applicable limit made by catch-up eligible participants who are subject to the requirements of section 414(v)(7)(A) be designated Roth contributions.

¶(ii) Analysis. Because Participant B's FICA wages from Employer E for calendar year 2026 exceeded $155,000, Participant B is subject to the requirements of section 414(v)(7)(A) for 2027, and any catch-up contributions that Participant B makes under the plan during 2027 (which includes the second half of the plan year beginning July 1, 2026) must be designated Roth contributions. Because Participant B is permitted to make catch-up contributions that are designated Roth contributions under the plan for the plan year beginning July 1, 2026 (after Participant B reaches an applicable limit (as defined in § 1.414(v)-1(b)(1)), all catch-up eligible participants under the plan must be permitted to make catch-up contributions that are designated Roth contributions for the plan year. Furthermore, if the plan continues to permit catch-up contributions for the plan year beginning July 1, 2027, then any catch-up contributions that Participant B makes under the plan during the first half of that plan year must be designated Roth contributions (as well as any catch-up contributions in the second half of the plan year if Participant B had wages exceeding the applicable threshold in 2027).

¶(i) Facts. Employer F and Employer G are members of a controlled group of corporations within the meaning of section 414(b). Participant C was hired by Employer F on January 1, 2026, and remained employed by Employer F through October 31, 2026. Effective November 1, 2026, Participant C transferred to Employer G and was employed by Employer G for the remainder of 2026. Participant C is employed by Employer G for all of 2027, the year in which Participant C attains age 55. Employer F reported $160,000 of FICA wages on a Form W-2 for Participant C for 2026. Employer G reported $35,000 of FICA wages on a Form W-2 for Participant C for 2026. Employers F and G are participating employers in a section 401(k) plan, Plan P. Participant C becomes eligible to participate in Plan P on January 1, 2027, and all of Participant C's elective deferrals for 2027 are made from compensation paid by Employer G.

¶(ii) Analysis. Employers F and G are common law employers of Participant C during different portions of 2026, and, under paragraph (b)(3) of this section, they are both employers sponsoring the plan. Because Plan P does not provide for the optional aggregation provision described in paragraph (b)(4)(iii) of this section, and Participant C's FICA wages from Employer G in 2026 did not exceed $155,000, Participant C is not subject to the requirements of section 414(v)(7)(A) with respect to elective deferrals that are made from compensation paid by Employer G in 2027. Accordingly, Participant C is not required to designate any catch-up contributions made for 2027 under Plan P as designated Roth contributions. This is the case even though Participant C had wages from Employer F (an employer sponsoring the plan) that exceeded $155,000 for 2026.

¶(i) Facts. Participant D, who attains age 55 in 2027, participates in a section 401(k) plan, Plan Q, sponsored by Employer H. Plan Q does not limit elective deferrals except as necessary to comply with sections 401(a)(30) and 415(c). Plan Q does not provide catch-up eligible participants with a separate election for elective deferrals that are in excess of the section 401(a)(30) limit and provides that such a participant is permitted to defer amounts in excess of the section 401(a)(30) limit on elective deferrals up to the applicable dollar catch-up limit for the year. For 2026, Participant D had $156,000 in wages (within the meaning of section 3121(a)) from Employer H. For 2027, Participant D elects to defer $1,250 into Participant D's account in Plan Q for each of 24 pay periods. Employer H has in place practices and procedures that are designed to prevent section 414(v)(7) failures and to result in compliance with the section 414(v)(7) Roth catch-up requirement at the time an elective deferral is made, and Plan Q provides for a deemed Roth catch-up election as described in paragraph (c)(3)(i) of this section. Nonetheless, Employer H discovers that all of Participant D's elective deferrals under Plan Q during 2027 (a total of $30,000) were pre-tax elective deferrals.

¶(ii) Analysis. Because Participant D had over $155,000 in wages from Employer H for 2026, under section 414(v)(7)(A), Participant D's catch-up contributions under Plan Q for 2027 (that is, the elective deferrals that exceed the section 401(a)(30) limit) are required to be designated Roth contributions. Thus, $5,000 of Participant D's elective deferrals for 2027 (that is, the elective deferrals in excess of the section 401(a)(30) limit of $25,000) are required to be designated Roth contributions. To keep these contributions in the plan, Employer H must correct the section 414(v)(7) failure with respect to $5,000 of Participant D's pre-tax elective deferrals for 2027 using one of the methods set forth under paragraph (c)(2) of this section. If all corrective steps required under paragraph (c)(2) of this section are not completed by April 15, 2028, then the excess deferral will not be treated as having been corrected by the deadline in § 1.402(g)-1(e)(2)(ii). Thus, the tax treatment rules of § 1.402(g)-1(e)(8)(iii) would apply to the excess deferral.

¶(i) Facts. The facts are the same as in paragraph (d)(5) of this section (Example 5), except that the first $3,750 of the $30,000 total elective deferrals Participant D makes for 2027 are designated Roth contributions. (Thus, during each of the first 3 pay periods in 2027, Participant D makes $1,250 of elective deferrals that are designated Roth contributions, and then subsequently makes $26,250 in pre-tax elective deferrals ratably over the remaining 21 pay periods.) Participant D reaches the section 401(a)(30) limit on elective deferrals during the twentieth pay period of 2027 and does not make any designated Roth contributions after reaching the section 401(a)(30) limit on elective deferrals in 2027.

¶(ii) Analysis. In accordance with paragraph (b)(1) of this section, the $3,750 in elective deferrals that are designated Roth contributions that Participant D made at the beginning of 2027 can be taken into account for purposes of satisfying Participant D's Roth catch-up requirement under section 414(v)(7). Thus, the portion of Participant D's pre-tax elective deferrals that are required to be corrected is $1,250 ($5,000 of elective deferrals that are in excess of the section 401(a)(30) limit, minus $3,750 of elective deferrals that were made as designated Roth contributions within the taxable year), and Employer H must correct the section 414(v)(7) failure with respect to only $1,250 of Participant D's pre-tax elective deferrals. To keep the $1,250 in the plan, Employer H must correct the section 414(v)(7) failure using one of the methods set forth under paragraph (c)(2) of this section. If all corrective steps required under paragraph (c)(2) of this section are not completed by April 15, 2028, then the excess deferral will not be treated as having been corrected by the deadline in § 1.402(g)-1(e)(2)(ii). Thus, the tax treatment rules of § 1.402(g)-1(e)(8)(iii) would apply to the excess deferral.

¶(i) General rule. Except as provided in paragraphs (e)(2)(ii) through (iv) of this section, this section applies to contributions in taxable years beginning after December 31, 2026. For prior taxable years, a reasonable, good faith interpretation standard applies with respect to section 414(v)(7).

¶(ii) Collectively bargained plans. In the case of an applicable employer plan maintained pursuant to one or more collective bargaining agreements, paragraphs (a) through (d) of this section shall not apply until the first taxable year described in paragraph (e)(2)(i) of this section, or, if later, the first taxable year beginning after the date on which the last collective bargaining agreement related to the plan that is in effect on December 31, 2025, terminates (determined without regard to any extension to those agreements). Further, if that plan is a multiemployer plan as defined in section 414(f), section 414(v)(7) is deemed satisfied until the first taxable year beginning after the date on which the last collective bargaining agreement related to the plan that is in effect on November 17, 2025 terminates (determined without regard to any extension to those agreements).

¶(iii) Governmental plan. In the case of a governmental plan within the meaning of section 414(d), paragraphs (a) through (d) of this section shall not apply until the first taxable year described in paragraph (e)(2)(i) of this section, or, if later, the first taxable year beginning after the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2025.

¶(iv) Early implementation permitted. A plan is permitted to apply the rules of this section to contributions in any taxable year beginning after December 31, 2023.