Updated July 28, 2026. Quick answer: The requirement is triggered by FICA wages under IRC §3121(a) from the employer sponsoring the plan. A sole proprietor or a partner does not receive FICA wages — self-employment income is not wages — so the rule does not reach them at any income level. An S-corp owner-employee at the identical income is caught by it.
Same income, opposite answer, purely because of entity
| Owner | FICA wages from the sponsor? | Caught by §414(v)(7)? |
|---|---|---|
| Sole proprietor | No — self-employment income, not wages | No |
| Partner in a partnership | No | No |
| S-corp owner-employee | Yes — your W-2 | Yes, above the threshold |
| Common-law employee of any employer | Yes | Yes, above the threshold |
Treasury said as much in the preamble to the final regulations: an individual who had no FICA wages from the sponsoring employer for the preceding calendar year would not be subject to the Roth catch-up requirement.
This is a genuine entity-choice consequence and it runs against the usual advice. S-corp election is normally recommended to cut self-employment tax. It also, as a side effect nobody mentions, creates the FICA wages that expose your catch-up contributions to the Roth requirement — costing you the deduction on them in the years you are most likely to want it. Combined with the way a low W-2 salary shrinks the employer contribution, the S-corp election has two retirement-plan costs that the payroll-tax comparison leaves out.
What this does not mean
It does not mean catch-up contributions are unavailable, or that Roth treatment is a bad idea. It means the choice stays yours. And the threshold itself is indexed under §414(v)(7)(E), so an owner near the line should check the current year’s figure rather than last year’s.
Every dollar limit in this area is indexed and changes annually. The figures printed in the Code itself — $40,000 for the defined-contribution limit, $160,000 for the defined-benefit limit, $15,000 for elective deferrals — are 2001 and 2005 base amounts that will never be updated in the statute; IRC §415(d) and §402(g)(4) do the adjusting. Get the current year’s figures from the IRS cost-of-living notice for that year rather than from any article, including this one. Nothing on this page states a dollar amount for that reason.
Sources
IRC §414(v)(1), (v)(2)(B), (v)(2)(C), (v)(2)(E) and (v)(3); §414(v)(7) (the Roth catch-up requirement) and (v)(7)(E) (its indexing); §402(g)(1) and (g)(4); IRS Notice 2023-62 (the administrative transition period); T.D. 10033, final regulations, Internal Revenue Bulletin 2025-40. All read July 2026.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.