With the One Big Beautiful Bill Act (OBBBA) now law (as of July 4, 2025), the tax backdrop for business leaders and high-net-worth individuals just changed. While OBBBA didn’t directly rewrite 401(k) rules, it built a more stable tax regime that increases the strategic weight of every retirement planning move. At the same time, SECURE 2.0’s Roth catch-up requirement forces a redesign for high‑earning participants’ contribution paths. Catch up contributions are available to employees aged 50 and over and allow for additional contributions to retirement plans over the annual maximum ($7,500 in 2025 and projected to be $8,000 in 2026).
If you’re a founder, executive, or owner with significant “catch-up” potential, or whose compensation structure sits near new thresholds, you need a refined 401(k) approach for 2026 and beyond.
Roth Catch-Up Requirement applies in 2027
Starting tax years after December 31, 2026, employees earning over $145,000 (employer level) must designate catch-up contributions as Roth (after-tax) regardless of whether they’d typically prefer pre-tax. If your plan doesn’t permit Roth contributions, some individuals might lose catch-up eligibility altogether.
For leaders and owners who are also employees, this change could shift your personal tax calculus dramatically.
Key Actions You Should Lead On
We recommend you take the following steps now, with your advisory team (such as Aura Advisors), to align your plan design and compensation structure:
- Project your 2026+ compensation path
If your total wages (from each employer) cross that $145,000 threshold, your catch-ups will be required to be made to a Roth plan. Model both current and alternative compensation structures and forecast hit to take-home cash flow. - Confirm your retirement plan’s Roth flexibility
Your plan must explicitly permit Roth contributions and catch-up allocations. If it doesn’t, you’ll need an amendment. Without Roth functionality, some high earners will be blocked from catch-ups entirely. - Reassess your own contribution strategy
For owner-employees and executives, the shift toward more Roth exposure may now favor paying some tax earlier in exchange for tax-free growth down the line. We’ll run scenarios to compare traditional pre tax contributions vs Roth contributions to understand the tax savings now vs the future. Working with a wealth advisor in addition to a tax advisor can provide well rounded financial strategies. - Coordinate with your payroll and recordkeepers
You must ensure systems can detect the $145,000 threshold, auto-designate catch-ups as Roth when required, and correct mistakes, if made. This is especially crucial in integrated compensation structures (bonus pay, equity, and related employers). - Use this as a benefit optimization tool
Your plan becomes more competitive when high earners see meaningful retirement flexibility. If some participants remain under the threshold, ensure the plan still allows them to choose pre-tax vs. Roth catch-up.
Aura’s Perspective: Strategy First, Compliance Always
Roth catch-up contributions may seem like a narrow technical change, but they signal something bigger: tax strategy is becoming more personalized, more regulated, and more dependent on well-structured plans. Combined with the stability introduced by OBBBA, this is a rare moment where forward-thinking planning can deliver real, measurable value over time.
For business owners, founders, and high-earning professionals, this isn’t just about compliance, it’s about making sure your retirement strategy keeps up with the complexity of your income and goals.
If you’re evaluating your compensation mix, your 401(k) design, or the broader tax implications of your plan, now’s the time to act. Our team can help you review your compensation structure , model retirement options, and make decisions that hold up under scrutiny. With deadlines approaching and final regulations issued, clarity now avoids headaches later.
For more reading:
- Introducing the Trump Savings Account: What Families Need to Know – Aura Advisors
- Invest in a Bright Future with the CalKIDS Savings Plan
- Understanding the One Big Beautiful Bill Act: What It Means for Individual Taxpayers
Aura Advisors is a boutique tax consulting and compliance firm working with start-ups, emerging growth companies, and affluent individuals. Making it safer for good people and good companies to continue to do good things.