Mike MilliganFounder and CEO, 1.oak Financial · Founder and CEO, 1.oak Financial

The Urgency of 2026 Planning: The Tax Surprise

29 Oct 2025 · 1 min

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In this excerpt, Mike Milligan explains the IRS’s newly‑issued guidance that creates a “reasonable and good‑faith” grace period for retirement plans that currently do not permit Roth contributions or conversions. Under this window, plans must update their rules by around 2027 to allow after‑tax (Roth) catch‑up contributions. Milligan emphasizes that the IRS’s underlying motive is to push more employee contributions into Roth accounts, thereby accelerating tax revenue collection now rather than later. The discussion frames this change as a critical planning issue for 2026, urging plan sponsors and participants to prepare for the upcoming mandatory adoption.

Chapters

Grace period nuance. What is the IRS doing to us? So what they're doing is they're allowing those plans who don't currently allow for Roth contributions a period of time that is called reasonable and good faith interpretation. It's a window period of time to allow plans to update. All right, so if your plan currently doesn't allow Roth conversions, by 2027 they will because the IRS is saying This, uh, this after-tax catch-up provision is going into play because what, what really— what the IRS really wants, Gary, is they want to get more tax revenue. And taking, taking, take— making employees, uh, contribute to Roth means that the IRS gets more money now.