The IRS has announced the cost-of-living adjustments (COLAs) for retirement plan dollar limits applicable to the 2026 plan year. Several key limits have increased, offering business owners and employees expanded opportunities for tax-deferred savings.
Each year, the IRS reviews applicable retirement plan limits and adjusts them for inflation under rules set forth in the Internal Revenue Code. For 2026, a number of limits have moved upward, reflecting continued inflationary pressures. Below is a summary of the limits most relevant to the plans we design and administer.
Defined Benefit & Cash Balance Plan Limits
The Section 415(b) annual benefit limit — the maximum annual benefit payable from a defined benefit plan — has increased for 2026. This limit directly governs how large a benefit can be funded under a traditional pension or cash balance plan, and thus determines the maximum allowable contribution for many of our clients.
| Limit | 2025 | 2026 |
|---|---|---|
| 415(b) Annual DB Benefit Limit | $280,000 | $290,000 |
| 415(b) Limit — Monthly | $23,333 | $24,166 |
↑ Indicates an increase from the prior year.
Defined Contribution & 401(k) Plan Limits
The limits governing defined contribution plans — including 401(k), profit sharing, and the combo plans we frequently design — have also increased. The Section 415(c) annual additions limit sets the ceiling on total contributions (employee deferrals plus employer contributions) to a participant's account in any plan year.
| Limit | 2025 | 2026 |
|---|---|---|
| 415(c) Annual Additions Limit | $70,000 | $71,000 |
| 401(k) / 403(b) Elective Deferral Limit | $23,500 | $24,500 |
| Catch-Up Contribution (age 50–59 and 64+) | $7,500 | $7,500 |
| SECURE 2.0 Enhanced Catch-Up (age 60–63) | $11,250 | $11,250 |
| SIMPLE IRA Deferral Limit | $16,500 | $17,000 |
↑ Indicates an increase from the prior year.
Compensation & Testing Thresholds
Several compensation-based thresholds used in plan administration and nondiscrimination testing have also been updated for 2026. These figures affect how plans are designed and tested each year, and are particularly relevant for small businesses with a mix of owner and non-owner employees.
| Limit | 2025 | 2026 |
|---|---|---|
| 401(a)(17) Annual Compensation Limit | $350,000 | $360,000 |
| Highly Compensated Employee (HCE) Threshold | $160,000 | $160,000 |
| Key Employee / Officer Compensation Threshold | $230,000 | $235,000 |
| SEP Minimum Compensation | $750 | $750 |
| SEP Annual Contribution Limit | $70,000 | $71,000 |
↑ Indicates an increase from the prior year.
What this means for business owners: The increase in the 415(b) defined benefit limit — from $280,000 to $290,000 — directly translates to larger allowable contributions in cash balance and traditional pension plans. Combined with the higher 415(c) limit of $71,000, owners utilizing a combo plan (cash balance + 401(k) profit sharing) may be able to shelter even more income on a tax-deferred basis in 2026 than in prior years. We encourage clients to contact us to revisit their contribution projections in light of these updated limits.
Looking Ahead
These limit increases reinforce the continued strength of defined benefit and combo plan strategies for high-income small business owners. If your plan was designed under prior-year limits, now is a good time to review whether updated contribution projections are warranted for the 2026 plan year.
We are happy to walk through the implications of these changes for your specific plan structure. Please do not hesitate to reach out to our team with any questions.