The Internal Revenue Service recently announced cost-of-living adjustments to the dollar limits on benefits and contributions for retirement plans, generally effective for Tax Year 2027 (see IRS Notice 2026-66). Most notably, the annual salary deferral limit for a 401(k) or 403(b) plan will increase to $25,500, and the dollar threshold for highly compensated employees will increase to $170,000 (for 2028 determinations). The more significant dollar limits for 2027 are as follows:
| LIMIT | 2026 | 2027 |
| 401(k)/403(b) Elective Deferral Limit (IRC § 402(g)) The annual limit on an employee’s elective deferrals to a 401(k) or 403(b) plan made through salary reduction. | $24,500 | $25,500 |
| Government/Tax Exempt Deferral Limit (IRC § 457(e)(15)) The annual limit on deferred compensation, including employee salary reductions and employer contributions, under eligible Section 457(b) plans maintained by state and local governments and tax-exempt organizations. | $24,500 | $25,500 |
| 401(k)/403(b)/governmental 457(b) Plan Catch-up Limit (IRC § 414(v)(2)(B)(i)) In addition to the regular limit on elective deferrals described above, employees who attain age 50 by the end of the calendar year generally can make an additional “catch-up” contribution not to exceed this limit. (See special rule below for those aged 60 – 63) | $8,000 | $8,500 |
| SECURE 2.0 Super Catch-up Age 60 – 63 (IRC § 414(v)(2)(E)(i)) Excludes SIMPLE 401(k) and SIMPLE IRA plans, which are subject to separate catch-up contribution limits. | $11,250 | $11,750 |
| Defined Contribution Plan Limit (IRC § 415(c)) The annual additions limit to a defined contribution plan (such as a 401(k) plan or profit sharing plan) — generally encompasses employer contributions, employee contributions and forfeitures, but excludes catch-up contributions. | $72,000 | $75,000 |
| Defined Benefit Plan Limit (IRC § 415(b)) The limitation on the annual benefits from a defined benefit plan. | $290,000 | $300,000 |
| Annual Compensation Limit (IRC § 401(a)(17)) The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing. | $360,000 ($535,000 for certain gov’t plans) | $375,000 ($555,000 for certain gov’t plans) |
| Highly Compensated Employee (HCE) Threshold (IRC § 414(q)) The definition of an HCE includes a compensation threshold for the prior year. A retirement plan’s discrimination testing is based on coverage and benefits for HCEs. | $160,000 in 2026 plan year (for HCE determination for 2027 calendar-year plans) | $170,000 in 2027 plan year (for HCE determination for 2028 calendar-year plans) |
| Roth Catch-up Wage Threshold (IRC § 414(v)(7)) Catch-up contributions by employees earning above this limit in FICA wages for the prior calendar year MUST be Roth contributions. | $150,000 in FICA wages in 2025 calendar year (for 2026 determination) | $155,000 in FICA wages in 2026 calendar year (for 2027 determination) |
| Key Employee – Officer Compensation Threshold (IRC § 416) The definition of a key employee includes a compensation threshold. Key employees must be determined for purposes of applying the top-heavy rules. Generally, a plan is top-heavy if the plan benefits of key employees exceed 60% of the aggregate plan benefits of all employees. | $235,000 | $245,000 |
| SEP Minimum Compensation Limit (IRC § 408(k)(2)(C)) The mandatory participation requirements for a simplified employee pension (SEP) includes this minimum compensation threshold. | $800 | $800 |
| SIMPLE Employee Contribution (IRC § 408(p)(2)(E)) The limitation on deferrals to a SIMPLE retirement account. | $17,000 | $17,500 ($19,100 for certain applicable SIMPLE plans) |
| SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii) and (iii)) The maximum amount of catch-up contributions that individuals age 50 or over may make to a SIMPLE retirement account or SIMPLE 401(k) plan. (See special rule below for those aged 60 – 63) | $4,000 | $4,000 ($3,850 for certain applicable SIMPLE plans) |
| SECURE 2.0 Super Catch-up Age 60 – 63 (IRC § 414(v)(2)(E)(ii)) The maximum amount of catch-up contributions that individuals aged 60 – 63 may make to a SIMPLE retirement account or SIMPLE 401(k) plan. | $5,250 | $5,250 |
| Trump Account Employer Contribution Exclusion (IRC § 128(b)) The annual exclusion limit for employer contributions to Trump accounts under a qualifying program. Adjusted for inflation for taxable years beginning after 2027. | $2,500 | $2,500 |
| Social Security Taxable Wage Base See the Social Security Contribution and Benefit Base site. This threshold is the maximum amount of earned income on which Social Security taxes may be imposed (6.20% paid by the employee and 6.20% paid by the employer). | $184,500 | $192,300 |
Members of the Jackson Lewis Employee Benefits and Executive Compensation Practice Group can help if you have questions or need assistance. Please contact a Jackson Lewis employee benefits and executive compensation team member or the Jackson Lewis attorney with whom you regularly work. Subscribe to the Benefits Law Advisor Blog.