On November 13, 2025, the IRS announced the Cost of Living Adjustments (COLAs) affecting the dollar limitations for retirement plans for 2026.
In October, the Social Security Administration announced a modest benefit increase of 2.8%. Retirement plan limits also increased over the 2025 limits. COLA increases are intended to allow participant contributions and benefits to keep up with the “cost of living” from year to year. Here are the highlights from the new 2026 limits:
- The calendar year elective deferral limit increased from $23,500 to $24,500.
- The elective deferral catch-up contribution increases from $7,500 to $8,000. This contribution is available to all participants aged 50 or older in 2026. An additional $3,250 is available in 2026 for participants aged 60-63.
| Annual Plan Limits | 2026 | 2025 | 2024 |
|---|---|---|---|
| Contribution & Benefit Limits | |||
| Elective Deferral Limit | $24,500 | $23,500 | $23,000 |
| Catch-Up Contributions (age 50-59 & over 63) | $8,000 | $7,500 | $7,500 |
| Catch-Up Contributions (age 60-63) | $11,250 | $11,250 | – |
| Annual Contribution Limit | $72,000 | $70,000 | $69,000 |
| Annual Contribution Limit including Catch-Up Contributions (age 50-50 and over 63) | $80,000 | $77,500 | $76,500 |
| Annual Contribution Limit including Catch-Up Contributions (age 60-63) | $83,250 | $81,250 | $76,500 |
| Annual Defined Benefit Limit | $290,000 | $280,000 | $275,000 |
- The maximum available dollar amount that can be contributed to a participant’s retirement account in a defined contribution plan increased from $70,000 to $72,000. The limit includes both employee and employer contributions as well as any allocated forfeitures. For those over age 50, the annual addition limit increases to include catch-up contributions.
- The maximum amount of compensation that can be considered in retirement plan compliance has been raised from $350,000 to $360,000.
- Annual income subject to Social Security taxation has increased from $176,100 to $184,500.
| Annual Plan Limits | 2026 | 2025 | 2024 |
|---|---|---|---|
| Compensation Limits | |||
| Maximum Plan Compensation | $360,000 | $350,000 | $345,000 |
| Income Subject to Social Security | $184,500 | $176,100 | $168,600 |
| Key Employee Compensation Threshold | $235,000 | $230,000 | $220,000 |
| Highly Compensated Employee Threshold | $160,000 | $160,000 | $155,000 |
| Annual Plan Limits | 2026 | 2025 | 2024 |
|---|---|---|---|
| IRA Limits | |||
| SIMPLE Plan Elective Deferrals | $17,000 | $16,500 | $16,000 |
| SIMPLE Catch-Up Contributions | $4,000 | $3,500 | $3,500 |
| Individual Retirement Account (IRA) | $7,500 | $7,000 | $7,000 |
| IRA Catch-Up Contribution | $1,100 | $1,000 | $1,000 |
Roth Catch-Up is Final – What Plan Sponsors Need to Know
On September 15, 2025, the U.S. Department of the Treasury and the IRS issued final regulations implementing the Roth catch-up contribution requirement under the SECURE 2.0 Act. These rules will significantly impact how plan sponsors administer catch-up contributions for certain high-income participants starting in 2026.
Key Takeaway for Plan Sponsors
Beginning January 1, 2026, employees who are age 50 or older in 2026 who earned more than $150,000 in FICA wages from the sponsoring employer in the prior year must make their catch-up contributions on a Roth (after-tax) basis. This change requires updates to plan documents, payroll systems, and participant communications.
“Plan administrators must ensure that systems are in place to identify affected participants and properly designate their catch-up contributions as Roth,” the IRS emphasized in its official release.¹
What’s New in the Final Regulations?
The final rule largely aligns with the proposed regulations but includes several clarifications and flexibility that plan sponsors should be aware of:
- Employer Aggregation Flexibility: Employers with multiple payroll entities can aggregate wages across common law employers to determine whether an employee exceeds the $150,000 threshold.
- Deemed Roth Elections: Plans may implement a default Roth treatment for catch-up contributions for affected participants, simplifying administration. Participants must be given the option to opt out.
- Error Correction Relief: If a plan mistakenly accepts a pre-tax catch-up contribution from a high-income participant, the IRS allows for correction without plan disqualification.
- Puerto Rico Plan Guidance: Special provisions apply to dual-qualified plans covering both Puerto Rico and United States participants, offering additional administrative flexibility.
- Puerto Rico code does not currently allow Roth contributions, but participants who meet the wage requirement are permitted to make catch-up contributions as after-tax contributions.
No Extension of Transition Relief: The administrative transition period still ends on December 31, 2025. Plan sponsors must be fully compliant by January 1, 2026.
Immediate Action Items
To prepare for the upcoming effective date, plan sponsors should:
- Coordinate with Payroll Providers: Ensure systems can track prior-year FICA wages and apply the Roth requirement accordingly.
- FICA (or Federal Insurance Contributions Act) wages include nearly all taxable earned income, such as salary, wages, bonuses, etc. An employee’s FICA wages may be higher than their federal taxable wages (Box 1 on Form W-2) because deductions such as pre-tax 401(k) contributions that reduce taxable wages are still considered to be FICA wages to calculate FICA taxes.
- Update Plan Documents: Amend plan language to reflect the Roth catch-up requirement and any deemed election provisions.
- Plan document provisions that do not currently allow participants to defer Roth contributions are not required to add the provision. Without the option, however, participants who are age 50 and older and meet the wage threshold will not be permitted to elect to defer catch-up contributions.
- Review Participant Communication Strategies: Clearly explain the change to affected participants, including the implications of Roth vs. pre-tax contributions.
- Train Internal Teams: HR, payroll and benefits teams should understand the new rules and how to respond to participant questions.
- Consult Legal and Recordkeeping Partners: Ensure all stakeholders are aligned on implementation and compliance.
Participant Impact
While the rule limits flexibility for high earners, it also presents an opportunity to educate participants on the benefits of Roth contributions, such as tax-free growth and no required minimum distributions (RMDs) during the account holder’s lifetime.
Broader SECURE 2.0 Context
The Roth catch-up rule is part of a broader effort under SECURE 2.0 to modernize retirement savings. Other provisions already released include:
- Higher catch-up limits for ages 60–63
- Student loan matching contributions
- Mandatory automatic enrollment for new plans
The final regulations also provide guidance on these provisions, helping plan sponsors implement them in a coordinated fashion.
Final Thoughts
The IRS’s final regulations provide much-needed clarity, but the compliance burden now shifts to plan sponsors. With the transition period ending in just a few months, proactive planning is essential.
“These final regulations reflect the Treasury Department and IRS’s commitment to helping Americans save for retirement while ensuring compliance with the law,” the IRS stated.¹
Need help preparing your plan for 2026? We can assist with drafting participant notices, updating plan language or creating a compliance checklist. Just let us know what you need.
¹IRS Newsroom – Treasury, IRS issue final regulations on new Roth catch-up rule, other SECURE 2.0 Act provisions
Year-End Data Collection
It’s that time of year again. A chill is in the air, football is on TV almost every night, and many are planning family holidays. It’s also time—if your plan has a December year end—to start thinking about your annual data request.
You may wonder why we ask for this data at the end of every year. The bottom line is that we need the information to keep your plan in compliance and provide the best possible service.
First, we verify that the company data we have for you is correct. Your address, phone number and company EIN appear on annual filings and plan documents, so it’s important that we have current information. However, this is only the start.
Ownership of businesses may change over time, whether it’s due to a sale or new partners. The change will influence who is considered a highly-compensated employee (HCE), as well as who is a key employee. We use this information to perform the compliance testing for your plan.
Due to family attribution laws, some family members of company owners are treated as owning part of the business, even if they don’t have direct ownership. Family members of owners, including children, spouses, parents or grandparents, who work at the company may be attributed ownership, which will have an effect on the compliance testing.
Ownership (or partial ownership) of other companies can also affect compliance testing on your plan. In certain situations, the other businesses will need to be included in the compliance testing, regardless of whether any employees of the other company participate in your plan. We will also need to know if the other business has its own retirement plan; if so, the two plans may need to be tested together.
Laws governing family attribution and business ownership can be complicated but are in place to protect the plan participants. Although we ask for this information at year end, we highly recommend informing us of any changes and their effective dates as soon as possible so we can review the impact on the plan design and avoid surprises during testing later.
Other events that can occur during the plan year include staffing and advisor changes. Retirement plan communications often involve confidential information and time-sensitive requests, which should only be received by individuals who are authorized to discuss the plan. To guarantee that our communications go to the correct person, please notify us of any changes immediately. With that said, we will still ask for updates at the end of the year to verify that our records are up to date.
In addition to the year-end items we’ve already mentioned, we also ask you a series of questions relating to your company and your plan. You’ll notice that many of these questions are repeated every year. As your business situation changes over time, your answers may be different from one year to the next. Ultimately, your responses help us to identify possible compliance issues and allow us to ensure your plan is meeting your business goals.
Lastly, although certainly not least, an accurate employee census is vital to accurate testing and reporting. Incorrect data for even a single individual can affect the results of multiple compliance tests. It’s important to provide complete information on all employees regardless of how many hours the employee worked or whether the employee participated in the plan. Even if an employee is newly hired and not yet eligible for the plan, they need to be included, as their information helps us determine their eligibility date. As a rule of thumb, the census data you provide should be consistent with the company’s year-end payroll records.
While these represent the types of information we will request from you at the end of the plan year, if there is anything that you think we should know about the business that we didn’t ask about, this is the perfect time to let us know. As you provide this year-end data, we would also request that you be thorough and complete to avoid follow-up questions and potential delays. We appreciate your partnership in providing the data we need. If you ever have any questions or concerns regarding our data request or anything else, please feel free to reach out to us.
Upcoming Compliance Deadlines for Calendar-Year Plans
© 2025 Benefit Insights, LLC. All Rights Reserved.
This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.
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Spring will arrive soon, promising new growth and a fresh beginning. It could also be the perfect time to do some spring cleaning for your plan. Let’s look at some areas that you might consider reviewing to ensure your retirement plan is operating efficiently.
Document your processes and procedures to make certain that plan tasks can be handled in case of any absences during an enrollment or pay period. Having a backup in place can prevent errors and delays that could lead to penalties.
Make sure to have a process in place to notify all new enrollments of their eligibility, regardless of whether the plan has automatic enrollment. Depending on the timing for plan entry, including the plan enrollment paperwork with the new hire paperwork could make entry easier for you. Please reach out with any questions regarding when an employee enters the plan.
Deposits of employee deferrals and loan repayments must be submitted to the plan as soon as possible to avoid penalties and corrections. For plans with less than 100 participants, a safe harbor rule allows deposits to be made within seven business days. For larger plans, the expectation is that the money will be deposited more quickly. Depositing these funds on the pay date will avoid the possibility of being late.
Monitoring deferral contribution limits during the calendar year will avoid refunds after year end. Make sure that your payroll is set up to stop deferrals once the limit is reached, including any catch-up contributions for those who have reached age 50.
To keep the plan in compliance, employer contributions must be deposited timely. Due dates are impacted by the type of contributions, required status and tax deductibility. If you have questions on when to deposit your employer contribution or even whether to make an employer contribution, please contact us.
Most plans must be covered by a fidelity bond. The minimum coverage is 10% of plan assets (rounded up to the next $1,000) and the maximum coverage is $500,000. Additional requirements apply to plans with employer securities or non-publicly traded assets. If your fidelity bond is insufficient, now is the time to raise the coverage. Inflation clauses that increase the bond amount as the plan assets increase can ensure that your bond coverage is always adequate. Contact us or your insurance provider if you don’t have a fidelity bond.
Another area to review is communication with participants. Helping your employees understand and trust the plan can increase their contributions. Be sure that your procedures include distributing any plan-related communications—including required participant notices.
Distributions also involve communication, including some of the aforementioned notices. Discussing distribution options with terminated participants, possibly as part of an exit interview, can help to reduce risk of lost participants. We’ll provide instruction on distributions for force-out distributions for small balances, testing corrections and required minimum distributions.
Your plan document is the legal source on how the plan should be administered; operating within its parameters is critical. It’s always worth taking time to review the plan document to ensure that you fully understand and are following its provisions. We’ll cover more details about the plan document later in this newsletter. We’re here to support you in keeping your plan in compliance. Please feel free to reach out with any questions.
Addressing the Challenge of Uncashed Distribution Checks
Uncashed distribution checks present a persistent and often overlooked challenge for retirement plan sponsors. Despite the best efforts of plan administrators, some participants fail to cash their distribution checks, leading to administrative burdens, fiduciary concerns and potential compliance issues. A recent publication by Retirement Management Services (RMS) sheds light on this issue and offers practical guidance for employers seeking to manage and mitigate the risks associated with uncashed checks.
Uncashed checks can arise for various reasons. Participants may have moved without updating their contact information, may not recognize the check as legitimate or may simply forget to deposit it. Regardless of the cause, the responsibility for addressing these uncashed funds ultimately falls on the plan sponsor. This creates a fiduciary obligation to act in the best interest of the participant while ensuring compliance with IRS and Department of Labor (DOL) regulations.
Sponsors are encouraged to maintain up-to-date contact information for all plan participants and to follow up promptly when checks remain uncashed. This may involve sending reminder letters, making phone calls or using certified mail to confirm receipt. In some cases, plan sponsors may also consider using electronic payment methods to reduce the likelihood of checks going uncashed in the first place.
The IRS and DOL have issued guidance on how to handle these situations, including the use of forfeiture accounts and escheatment to state unclaimed property programs. However, these options come with their own set of rules and potential pitfalls. For example, using a forfeiture account may require the plan document to explicitly allow for such treatment. Escheatment laws, which allow the government to assume control of unclaimed property, vary by state. As such, plan sponsors must carefully evaluate their options and consult with legal or compliance experts as needed.
Another important consideration is the documentation of all the efforts made to contact participants and resolve uncashed checks. Maintaining a clear audit trail can help demonstrate fiduciary prudence and protect the plan sponsor in the event of an audit or legal challenge. It is extremely important to have a written policy in place that outlines the steps to be taken when a check remains uncashed beyond a certain period.
By taking a proactive, well-documented and compliant approach, employers can fulfill their fiduciary duties, reduce administrative burdens and ensure that participants receive the benefits they are entitled to.
Source: Retirement Management Services – “Uncashed Distribution Checks” https://www.consultrms.com/Resources/59/Plan-Sponsor-Tips-and-Help/212/Uncashed-Distribution-Checks
Divorce and the Retirement Plan
When a participant in a qualified retirement plan undergoes a divorce, the participant’s account balance may be an asset that is split with the former spouse. As the plan exists for the exclusive benefit of its participants, a court order is required to transfer the participant’s benefits to the ex-spouse. Once approved by the plan administrator, this court order is called a Qualified Domestic Relations Order (QDRO).
The QDRO is a judgment, decree or order that must be issued by a state authority (usually a court). It can be part of the divorce settlement or it may be a separate document. Because of the serious nature of separating the participant’s account balance, the QDRO is more than just an agreement made by both parties — it must also be signed by a judge.
A QDRO will describe how to divide the participant’s account balance between the participant and the ex-spouse, referred to as the alternate payee. In some cases, a set dollar amount will be allocated; in others, a percentage of the account may be designated. In the latter case, the amount assigned to the alternate payee represents the given percentage of the participant’s total vested account balance as of a specified valuation date. This percentage will apply to all sources — such as deferrals, matching or profit sharing — unless specified by the QDRO. Any interest and investment gains/losses that accrue between this valuation date and the date the funds are separated into an account for the alternate payee are often factored into this final calculation. If the participant has outstanding loans, the QDRO will usually indicate how the loans are handled.
Contributions such as deferrals and employer matching made after the valuation date are credited to the participant’s account. Earnings and losses are applied to the account balances. Once the division is complete, the alternate payee’s portion (either dollars or shares) is transferred to an account in the alternate payee’s name.
If the plan allows, the alternate payee may be paid out in a cash or rollover distribution. Not all plan documents allow the alternate payee to receive a distribution before reaching normal retirement age, so it’s important to follow the terms of the plan. In addition, the QDRO cannot violate the provisions of the plan document by requiring a plan to provide an alternate payee or participant with any type or form of benefit not otherwise provided under the plan.
Although the most common situation for a QDRO is a divorce, it can be issued in other situations, such as to a dependent in the case of child support. If the alternate payee is a minor child or legally incompetent, the order can also require payment to the individual with legal responsibility for the alternate payee. If a participant or their attorney provides you with a copy of a divorce decree that references the plan or a QDRO, please contact us immediately, and we will work with you to ensure it meets the requirements of the plan.
Important note for defined benefit plans: For 2025 plan years, PBGC premiums are due one month earlier than usual, specifically on the 15th day of the ninth month after the beginning of the plan year. For calendar year plans, this means the premium is due on September 15, 2025, instead of the usual October 15. This accelerated deadline is due to a provision in the Bipartisan Budget Act of 2015.
Upcoming Compliance Deadlines for Calendar-Year Plans
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