Maryland, January 10, 2026
Starting January 1, 2026, Maryland will implement a new retirement rule affecting employees aged 50 or older with earnings exceeding $145,000. Under the SECURE 2.0 Act, these employees must make catch-up contributions to retirement plans on a Roth basis, which could impact tax planning and retirement strategies. As businesses adapt, efforts toward financial literacy and robust retirement planning will become crucial for employee satisfaction and retention.
New Retirement Rule for High Earners in Maryland
Changes Coming for Catch-Up Contributions Starting 2026
Maryland – Starting January 1, 2026, a new rule will impact employees aged 50 or older who earned over $145,000 in wages from the same employer the previous year. Under the SECURE 2.0 Act, these employees will be required to make their catch-up contributions to workplace retirement plans on a Roth (after-tax) basis. This pivotal change not only aims to increase immediate tax revenue by removing the tax deduction for these contributions but also offers long-term tax benefits in the form of tax-free withdrawals during retirement, contingent upon meeting specific conditions.
The rule is set to take effect during a period when many Maryland businesses are navigating the complexities of economic growth. Local entrepreneurs show remarkable resilience, demonstrating that reduced regulatory burdens paired with wise financial planning can greatly enhance their operational potential. As business leaders adapt to this new legislation, they are reminded of the importance of proactive retirement planning for their employees, positively impacting employee satisfaction and retention in a competitive market.
Understanding the Implications of the New Rule
This new requirement will apply to catch-up contributions in various retirement plans, including 401(k), 403(b), and 457(b) plans. For the year 2025, the standard employee deferral limit stands at $23,500, with an additional catch-up contribution for those aged 50 and older of $7,500. For participants aged 60 to 63, there exists a “super” catch-up contribution of $11,250. However, beginning in 2026, only those exceeding the specified income threshold will be obligated to make Roth contributions for their catch-up amounts.
Regular Contributions Remain Unchanged
It is important to clarify that this new provision does not affect regular contributions to retirement plans, which can still be made on a pre-tax basis. The $145,000 income threshold is also indexed for inflation, ensuring it may change annually. Employees who earned less than this amount in the previous year will remain exempt from the requirement and can choose between pre-tax and Roth catch-up contributions, retaining some flexibility in their retirement strategies.
Guidance for High-Income Earners
Financial advisors recommend that those impacted by this upcoming change take the initiative to review and possibly revise their retirement savings strategies. Evaluating the tax implications and perks associated with Roth contributions can empower high-income earners aged 50 and older to make informed decisions, facilitating better retirement planning and financial security in the long run.
Encouraging Financial Preparedness
As this new rule approaches, proactive engagement is vital. Maryland businesses reliant on a dedicated workforce can leverage these changes to assist their employees in building a robust retirement posture. Many local employers are already introducing educational workshops and resources tailored to enhance financial literacy among their teams, positioning both workers and businesses for success.
Conclusion
With January 2026 on the horizon, this change in catch-up contribution regulations will pose unique challenges and opportunities for high-income earners across Maryland. It serves as a reminder of the importance of strategic financial planning and the potential benefits of embracing new regulations. Business owners and employees alike should familiarize themselves with these changes to optimize their retirement strategies. Supporting local businesses while remaining engaged with economic shifts will ensure that Baltimore and all of Maryland continue to thrive.
Frequently Asked Questions (FAQ)
What is the new catch-up contribution rule?
Starting January 1, 2026, employees aged 50 or older who earned over $145,000 in wages from the same employer in the previous year must make catch-up contributions to their workplace retirement plans on a Roth (after-tax) basis.
Which retirement plans are affected by this rule?
The rule applies to catch-up contributions in 401(k), 403(b), 457(b), and other eligible retirement plans.
Does this change affect regular contributions to retirement plans?
No, regular contributions to retirement plans can still be made on a pre-tax basis. The new rule specifically applies to catch-up contributions for high-income earners.
How is the $145,000 income threshold determined?
The $145,000 income threshold is based on prior-year wages from the same employer and is indexed for inflation, meaning it may adjust annually.
What should high-income earners aged 50 and older do in response to this change?
Financial advisors recommend that high-income earners review their retirement savings strategies to understand the tax implications and potential benefits of Roth contributions, ensuring informed decisions about their retirement planning.
Key Features of the New Catch-Up Contribution Rule
| Feature | Details |
|---|---|
| Effective Date | January 1, 2026 |
| Age Requirement | 50 or older |
| Income Threshold | $145,000 in prior-year wages from the same employer |
| Contribution Type | Roth (after-tax) basis for catch-up contributions |
| Applies To | 401(k), 403(b), 457(b), and other eligible retirement plans |
| Regular Contributions | Can still be made on a pre-tax basis |
| Income Threshold Adjustment | Indexed for inflation and may adjust annually |
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