Roth Catch up required or not

[DDB BN]

Plan Sponsor has non-union and union compensated employees.  Union compensation is excluded from the plan.  One of the employees will have W-2 FICA wages of about $70,000 in non-union compensation for 2025 and W-2 FICA wages in union compensation of about $125,000 for 2025.  Is the union compensation included to determine if the employee's compensation is over $150,000 for Roth catch up for 2026?

[Peter Gulia]

Are both amounts paid by the same common-law employer?

Or does the business divide union and nonunion jobs between two or more companies?

[DDB BN]

There are 2 Corps in the controlled group.  Employees of both Corporations receive union and non-union income.  The W-2 they receive each year includes both and we back out the union comp for calculation of the SHM.

[Peter Gulia]

If a participant has more than one common-law employer, 26 C.F.R. § 1.414(v)–2(b)(4) (not yet codified) sets detailed rules about whether one need not or may aggregate Social Security wages from two or more employers.

https://www.govinfo.gov/content/pkg/FR-2025-09-16/pdf/2025-17865.pdf at pages 44549-44550 [pdf pages 23-24].

[DDB BN]

The employee earned non-union and union compensation from one employer.  His W-2 from the one employer includes both non-union and union compensation.   He did not receive any compensation from the other employer in 2025.

[Peter Gulia]

If the employee will have about $195,000 in Social Security wages (box 3) on one 2025 Form W-2 wage report, that would make her a § 414(v)(7)-affected participant for 2026 (if she otherwise is eligible for an age-based catch-up).

That a portion of the wages was from union labor does not by itself exclude that portion from § 414(v)(7)’s measure of Social Security wages.

This is not advice to anyone.

[DDB BN]

Thank you.