SECURE 2.0 Roth Catch-Up Rules and the 403(b) 15-Year Catch-Up: What Tax-Exempt Employers Need to Know

Tax-exempt employers whose 403(b) plans offer catch-up contributions for participants age 50 and above should be well on their way to compliance with the SECURE 2.0 Act Roth catch-up requirement. Starting in 2026, employees whose prior-year FICA wages from the employer sponsoring the 403(b) plan exceeded $150,000 (indexed for inflation) must make all age-50 catch-up contributions to a 403(b) plan (or a 401(k) plan or governmental 457(b) plan) on a Roth after-tax basis.

403(b) plans, however, may offer a distinct type of catch-up contribution not permitted under other defined contribution plans: 15-year catch-up contributions. The Roth catch-up requirement does not apply to 15-year catch-up contributions.

For some employers, this presents an administrative challenge. If a 403(b) plan offers both age 50 catch-up contributions and 15-year catch-up contributions, the employer’s payroll and recordkeeping systems must:

• Treat any catch-up amount first as a 15-year catch-up contribution, to the extent permitted under the plan, and not apply the mandatory Roth treatment to the 15-year catch-up contribution; and
• Treat any remaining catch-up amount as an age-50 catch-up contribution, and apply the Roth catch-up requirement, if applicable.

Employers whose 403(b) plans do not currently include 15-year catch-up contributions may wish to evaluate whether adopting this optional feature would benefit employees with long service, including the employees whose catch-up contributions otherwise would have to be made on a Roth basis.

Who is eligible for 15-year catch-up contributions? If 15-year catch-up contributions are offered under a 403(b) plan, they can be made available to any employee who has completed at least 15 years of service, regardless of age. An employee younger than age 50 may qualify for 15-year catch-up contributions, while an employee age 50 or older may not.

What is the 15-year catch-up contribution limit? An employee who is eligible to make 15-year catch-up contributions may contribute an additional amount above the otherwise applicable deferral limit, up to the least of the following amounts:

• $3,000;
• $15,000, reduced by amounts previously deferred under the 15-year catch-up (including designated Roth contributions made under this provision); or
• $5,000 multiplied by the employee’s years of service with the qualified organization, reduced by all of the employee’s prior elective deferrals.

For example, suppose a nurse has worked for a nonprofit hospital for 20 years and has made a total of $82,000 in elective deferrals to the hospital’s 403(b) plan, but has made no 15-year catch-up contributions to date. The nurse can make the full $3,000 15-year catch-up contribution because, under the third limitation:

• $5,000 × 20 years of service = $100,000; and
• $100,000 – $82,000 = $18,000, which is not less than $3,000 or $15,000.

Employers that offer 15-year catch-up contributions in their 403(b) plans should be aware that the rules for counting years of service for 15-year catch-up contributions are intricate and differ from the rules for counting service for other purposes, but a full explanation of those rules is beyond the scope of this post.

Coordination with SECURE 2.0 Roth Catch-Up Rules

An employee may be eligible for both 15-year catch-up contributions and age-50 catch-up contributions. In that case, the pre-SECURE 2.0 Treasury Regulation provides that any catch-up amount is treated first as a special 403(b) catch-up to the extent a 15-year catch-up is permitted, and then as an age-50 catch-up to the extent the catch-up amount exceeds the maximum 15-year catch-up.^[1] The preamble to the final regulations regarding SECURE 2.0 Roth treatment of catch-up contributions of certain high earners confirms that by the operation of the prior rule, 15-year catch-ups are not subject to the Roth requirement.

Accordingly, because the15-year catch-up must be applied before any age 50 and above catch-up contributions, participants—including those whose prior-year FICA wages exceed the SECURE 2.0 threshold—may continue to make catch-up contributions on a pre-tax basis to the extent they have not exceeded their 15-year catch-up limit.

Practical Considerations

With the SECURE 2.0 mandatory Roth treatment for catch-up contributions of certain high earners, the interaction between the two catch-up features places greater emphasis on accurately determining years of service and maintaining historical contribution records. Accordingly, tax-exempt employers who offer 15-year catch-up contributions in their 403(b) plan should review whether their payroll and recordkeeping systems can:

• Accurately identify employees who satisfy the 15-year service requirement;
• Calculate years of service in accordance with the applicable rules;
• Track prior 15-year catch-up contributions and apply the three-part limitation; and
• Coordinate the statutory ordering rules with the SECURE 2.0 Roth catch-up requirements.

If you have any questions about the catch-up contribution rules, please contact a member of Verrill’s Employee Benefits & Executive Compensation Group.

[1] Treas. Reg. § 1.403(b)-4.