Major Retirement Plan Contribution Limits Increase for 2026: What Employers & Plan Sponsors Should Know

Key Changes at a Glance

According to the IRS’s News Release, IR-2025-111, the following changes will be effective for plan years beginning on or after January 1, 2026:

• The annual elective deferral limit for participants in 401(k) plans, 403(b) plans, governmental 457 plans, and the federal Thrift Savings Plan rises to $24,500 (up from $23,500 in 2025) for most participants.
• The annual contribution limit for IRAs increases to $7,500 (up from $7,000).
• The catch-up contribution amount for participants age 50 and over for most 401(k), 403(b), and 457 plans increases to $8,000 (up from $7,500). For participants aged 60-63 in certain plans that have adopted an amendment under the SECURE 2.0 Act enhanced rules, the higher limit remains $11,250.
• The phase-out ranges for IRA deductions, Roth IRA eligibility, and the Saver’s Credit have also increased, meaning more employees may have additional savings eligibility. For the specific ranges, see the IRS release here.

What This Means for Employers & Plan Sponsors

1. Update plan documents and administrative systems. If your plan document or administrative system contains hard-coded dollar limits (rather than “as required by law”), it’s time to revise them to reflect the 2026 limits. Mistakes here can lead to operational errors down the road.
2. Communicate proactively with participants. Make sure plan communications reflect the new 2026 limits. For employees who qualify for catch-up contributions or “super-catch-up” contributions, highlight these opportunities for increased retirement savings.
3. Review matching, safe-harbor, and discretionary employer contributions. With higher deferral limits, participants may reach maximum deferrals sooner in the year. Employers should monitor whether matching formulas or safe-harbor contributions need adjustments to remain aligned with goals (e.g., encouraging full deferral, avoiding unintended discrimination issues).
4. Consider eligibility and nondiscrimination testing effects. Higher deferral limits could impact ADP/ACP testing and other nondiscrimination outcomes. In safe-harbor plans or when using discretionary employer contributions, review strategy with your third-party administrator or benefits counsel.
5. Leverage communications to drive savings. Use this update as a teachable moment, highlighting the increased limits and demonstrating what maximized contributions will look like for plan participants. Encourage mid-year reviews of savings goals. For higher-income participants, remind them of IRA/Roth IRA limits and phase-outs.
6. Watch for future regulatory guidance. As you plan communications and administrative updates, remain aware of possible future IRS or Department of Labor (DOL) guidance or changes, particularly around enhanced catch-up rules under SECURE 2.0.

Action Items for Q4 2025

• Confirm that your plan administrator is aware of the COLA changes and that your plan document is up to date.
• Check your payroll and vendor systems to ensure that elective deferral and catch-up contribution limits will be set properly for 2026.
• Prepare employee communications to be distributed ahead of any new plan year open enrollment cycle or deferral election period.
• Review your matching or safe harbor plan design in light of the increased deferral threshold. Consider whether you wish to use this as an opportunity to encourage full participation or adjust match timing.
• Coordinate with your TPA or recordkeeper to ensure that year-end testing assumptions and participant education reflect the new limits.
• Train plan fiduciaries to make them aware of the changes, their implications, and to ensure fiduciary oversight of implementation and communication.