When Submitting Contributions, Prioritize Pre-tax Contributions for Roth Catch-up Participants

As a reminder, the maximum 401(k) contribution amount for 2026 is $24,500. Individuals aged 50 and older may contribute an additional $8,000 in catch-up contributions; however, starting in 2026, catch-up contributions for participants with earnings of more than $150,000 in 2025 (“high earners”) must be made as Roth. Some high earners, particularly those who elected to contribute both pre-tax and Roth money from each paycheck, are starting to reach the $24,500 pre-tax contribution limit.

A contribution for a high-earning participant submitted through the NRECA Employee Benefits website’s 401(k) Pension Plan Contributions event will be rejected if it causes the total contribution to exceed $24,500, even if the participant could have made additional pre-tax contributions.

For example, if a high-earning participant has already contributed pre-tax contributions of $16,500 and $8,000 in Roth this year, an additional pre-tax contribution would exceed the $24,500 maximum and be rejected by the system. If this occurs, NRECA will contact the benefits administrator to confirm whether the participant wishes to maximize pre-tax contributions for the year. If yes, NRECA will characterize up to $8,000 of previous Roth contributions as catch-up (assuming the high-earning participant is otherwise eligible to make catch-up contributions) to allow the participant to continue making pre-tax contributions if this is the participant’s intent.

The following best practices will help high-earning participants (who are otherwise eligible to make catch-up contributions and are subject to the Roth mandate) achieve their desired pre-tax and Roth contribution elections while staying within allowable limits:

NRECA’s systems alert NRECA staff when a contribution will exceed the $24,500 limit, regardless of contribution source. When this occurs, NRECA will reach out to you to confirm how to proceed and whether the participant intends to maximize annual pre-tax (or both pre-tax and Roth) contributions.
If the participant intends to maximize pre-tax contributions for the year, NRECA will move any prior Roth contributions (up to $8,000) to be catch-up contributions. If not, NRECA will refund the contribution.
Thereafter, NRECA will continue to post both Roth and pre-tax contributions as submitted, up to allowable limits. If a later contribution is rejected because the $24,500 limit is again reached due to a combination of Roth and pre-tax contributions, we will contact you again to confirm the participant’s intent. To minimize potential problems co-ops could experience with tax reporting, NRECA will no longer make contribution adjustments after November 15.
Encourage high-earning participants who want to maximize their annual contributions (including catch-up contributions) to change their election to begin with pre-tax contributions. Doing so ensures that NRECA will contact you to verify the participant’s wishes only when their pre-tax contributions exceed the limit. Co-ops can also monitor contributions for high earners and adjust their payroll system to stop pre-tax contributions once the $24,500 limit has been reached and begin Roth catch-up contributions.
NRECA will not post contributions as pre-tax if they’re submitted as Roth contributions, or vice versa. NRECA will return these contributions and your co-op should re-submit the contributions after adjusting tax withholding.
If you received an alert earlier this year that a participant had reached the maximum 401(k) contribution amount, please contact NRECA’s 401(k) Reconciliation team by November 15 to discuss the specific scenario, contribution history, and next steps.

If you have additional questions on this topic, please call 866.673.2299 or email contactcenter@nreca.coop.