Navigating yearly updates to retirement plan limits can be challenging, but staying informed helps you make the most of your employer-sponsored plans and keep your organization compliant. In this quick guide, we’ve summarized the newest IRS contribution and compensation limits for 2026 so you can plan ahead with confidence.
Stay Ahead of Changes:
Staying ahead of regulatory changes is critical to protecting your organization’s compliance, minimizing risk, and ensuring accurate forecasting. The IRS has just released the cost-of-living adjustments (COLAs) for retirement plans that will take effect in 2026, and there’s one “twist” everyone should know:
Major Roth Catch-Up Change: $150,000 FICA Wage Threshold Applies for HPIs
In a retroactive move, the IRS has increased the Roth Catch-up FICA wage threshold from $145,000 to $150,000. This means that for 2026, plan sponsors must use the $150,000 limitation to determine who qualifies as a Highly Paid Individual (HPI). HPIs must make any catch-up contributions as Roth amounts, not pre-tax, per federal mandate.
Roth Catch-up FICA wage threshold increased to
What Does This Mean for You?
Start by reviewing your payroll and HR data to accurately identify which employees now qualify as Highly Paid Individuals (HPI) under the new compensation threshold. Ensuring your records are current, covering salary, bonus, and other compensation types will help prevent compliance issues and ensure eligible employees receive the correct contributions.
Next, communication is key. Notify participants affected by the new Roth catch-up rule, explaining that employees who exceed the federal compensation threshold must make catch-up contributions through Roth (after-tax) deferrals. To support understanding and minimize confusion, consider sharing:
- Targeted emails or memos
- Frequently asked questions (FAQs)
- Information sessions or webinars
Finally, update your internal systems and plan documents. Work with your plan provider or payroll administrator to modify processes that track and handle Roth catch-up contributions. Review and revise plan documents, summary plan descriptions, and employee handbooks so they reflect the latest requirements and ensure continued compliance.
2026 Retirement Plan Limits: Quick Reference
The IRS has announced new retirement plan limits for 2026. Here are the highlights:
- The maximum annual benefit for defined benefit (DB) plans will be $290,000.
- The annual addition limit for defined contribution (DC) plans is increasing to $72,000.
- You can defer up to $24,500 to your 401(k), 403(b), or 457 plan.
- Standard catch-up contributions will be $8,000, with a higher catch-up amount of $11,250 available for participants ages 60–63.
- The compensation limit for Highly Compensated Employees (HCEs) goes up to $160,000.
- The maximum compensation that can be considered for plan purposes is $360,000.
- IRA contribution limits are rising to $7,500.
For a full chart comparing these limits to previous years, click here.
Staying ahead of retirement plan changes ensures your organization remains compliant and your employees make the most of their savings’ opportunities. As these 2026 updates take effect, take the time now to review your internal processes, communicate clearly with your team, and confirm your plan documents are up to date.
Don’t hesitate to reach out, we’re here to help you navigate every step, Visit pacpension.com
