Legislative lowdown: IRS increases 401(k) contribution limits for 2026

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The Internal Revenue Service (IRS) shared new contribution limits for employees enrolled in retirement plans on Nov. 13, shortly after the federal government shutdown ended.

While the release of public details on the 2026 limits were delayed due to the shutdown, HR teams can now update their retirement plan processes for the coming year.

Employees who participate in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan can contribute up to $24,500 to these plans next year, up from $23,500 in 2025.

Older individuals can put additional money into these plans, and the limits on those contributions will go up in 2026, too. So-called “catch-up contributions” for workers 50 and older will be capped at $8,000, up from $7,500 in 2025—meaning these participants can contribute up to $32,500 to their retirement plan annually.

Employees who are between the ages of 60 and 63 have a higher catch-up contribution limit ($11,250) which remains unchanged next year.

One important change regarding high earners. Starting in 2026, workers earning more than $150,000 during the previous calendar year must put catch-up contributions into a Roth plan, which are funded with after-tax dollars. This requirement comes from a provision included in the SECURE 2.0 Act, which was enacted in 2022.

Though the earnings threshold for this requirement was initially set at $145,000, it will go up to $150,000 starting in 2026, according to the recent IRS guidance. The income threshold refers to FICA wages, or the portion of employees’ pay that goes to Social Security and Medicare taxes.

This means that these high earners will miss out on a tax break they previously received from putting catch-up contributions into 401(k) plans, which aren’t taxed until retirement. A 60-year-old whose income is taxed at 35%, for example, could miss out on a $4,000 deduction from a $11,250 catch-up contribution, the Wall Street Journal estimated.

High earners who don’t have access to a Roth 401(k) won’t be able to make any catch-up contributions under this new regulation, so HR teams would have to modify their plans to reflect this restriction if no Roth feature is provided.

Otherwise, HR should work with payroll to ensure they “can identify and properly treat affected catch-up contributions as Roth,” as well as change their plan documents to comply with this new regulation, attorneys with the law firm Ogletree Deakins suggested in a recent blog post.