Issue/Symptom/Question

What is Penta’s plans for implementing the required changes for the Secure Act 2.0 that go into effect 01/01/26.  Specifically, regarding the Roth requirement for the catch-up contributions for those employees who earn greater than the IRS limit.

Applies To

Penta for Windows

Payroll

Resolution/Fix/Answer

Expanded Coverage and Retirement Savings:

• Automatic Enrollment: SECURE 2.0 mandates automatic enrollment in new 401K plans, unless an exemption applies, aiming to increase participation and savings.

  • This would be administered by your payroll/HR department by communicating to new employees the option to opt-out of the 401K plan. Otherwise, all new employees will need to be automatically enrolled in your 401K.

• Catch-up Contributions: Increased catch-up contribution limits for individuals aged 60 to 63, starting in 2025, allowing them to contribute more to their retirement accounts.

  • Set up a separate 401K catch-up deduction/reimbursement (if matched) for any employee between this age range. Assign this deduction to these employees.

• Roth Catch-up: Beginning in 2026, all catch-up contributions for participants earning over $145,000 in the prior calendar year must be made on a Roth (after-tax) basis. 

  • Identify which catch-up contribution eligible employees earned more than $145K in 2025.
  • Set up these employees with a Roth 401K deduction and/or reimbursement (if matching) for the catch-up contributions portion of the 401K.