2026 IRS Retirement Plan Limit Increases: What Employers Need to Know
A breakdown of the 2026 retirement plan limits, outlining key updates that will impact payroll, plan administration, and employee planning.
The IRS has released the official retirement plan contribution and compensation limits for 2026 in Notice 2025-67. These annual updates affect payroll processing, plan administration, and employee financial planning, making it important for employers to understand what’s changing before the new year begins.
Below is a breakdown of the key adjustments and what they mean for businesses and their employees.
Contribution Limits Are Increasing Across Major Plan Types
Several limits are rising in 2026, giving employees more room to save and potentially increasing employer planning needs:
401(k), 403(b), and 457 Plans:
The annual deferral limit will increase to $24,500 (up from $23,500 in 2025).Defined Contribution Plans:
The overall annual limit increases to $72,000 from $70,000.Defined Benefit Plans:
Annual benefit limits rise to $290,000, up from $280,000.SIMPLE Plans:
Standard limit: $17,000 (up from $16,500)
For employers with 25 or fewer employees: $18,100 (up from $17,600)
These increases not only broaden savings opportunities for employees, but also require payroll teams to confirm that plan setup, deduction rules, and annual limits are updated before 2026 payrolls begin.
Catch-Up Contributions: Increases and Important Roth Rules
Employees age 50 or older will see higher catch-up limits in 2026:
401(k), 403(b), 457:
$8,000, up from $7,500.SIMPLE Plans:
$4,000, up from $3,500.SIMPLE with ≤25 employees:
$3,850 (unchanged).
The IRS also kept the enhanced catch-up limits for ages 60–63 unchanged for 2026:
SIMPLE: $5,250
401(k), 403(b), 457: $11,250
Roth Catch-Up Requirement Continues:
Employees whose 2025 wages exceed $150,000 must make all 2026 catch-up contributions on a Roth basis.
This requirement is significant for payroll because it affects deduction coding, W-2 reporting, and year-end processing.
(Strongpay already fully supports Roth catch-up identification and processing.)
Updated Compensation Thresholds for Testing and Compliance
The IRS also announced new thresholds that affect discrimination testing, plan qualification, and fringe benefit calculations:
Annual Compensation Limit for Qualified Plans:
$360,000 (up from $350,000)Highly Compensated Employee (HCE) Threshold:
Remains $160,000 for 2026 (based on 2025 compensation)Key Employee Threshold for Top-Heavy Plans:
$235,000, up from $230,000Control Employee Compensation for Fringe Benefit Valuation:
Appointed/elected officers: $145,000
Other employees: $290,000
These thresholds determine how plans are tested and how certain benefits are valued, making accuracy in payroll data more important than ever.
What This Means for Employers
For many organizations, these updates will require adjustments to payroll systems, plan documents, contribution rules, and employee communication.
Ensuring payroll and retirement stay aligned is essential—especially with Roth catch-up rules, SIMPLE plan variations, and increased savings opportunities for employees.
How Strongpay Helps
Strongpay monitors regulatory changes like these and embeds updates directly into payroll and retirement workflows. With built-in support for features such as Roth catch-up identification and limit management, employers can move into 2026 with confidence.