Retirement Funding Update
Update Time
The new year is just around the corner so it is time to start thinking about these updates to the 401(k) plan rules:
401(k) employee deferral - New Limit increases to $24,500
Standard age 50+ catch‑up - New limit increases to $8,000
Max employee deferral age 50+ - New total limit of $32,500 (24,500 + 8,000)
Defined Contribution annual additions (415(c)) - New limit that includes deferral, match and Profit Share of $72,000 (excludes age‑50 catch‑up)
Annual Compensation limit - New limit on wages used to calculate employer match increased to $360,000
NEW RULE - High‑earner catch‑up tax treatment - Catch up must be Roth if prior‑year wages >$145,000 and age 50+
NEW RULE - “Super” catch‑up for those 60-63 - Catch up increases to $11,250 for 2026 but high-earner treatment applies.
NEW RULE - Optional ROTH match for employer’s match portion. Employer still gets deduction but the match is added to taxable wages for employee.
So what do you need to do about all of these updates to ensure your plan is compliant and more importantly, you are optimizing your own retirement savings?
As the Plan Sponsor for your 401(k) plan:
Touch Base with your 401(k) Third Party Administrator: Check that your current plan document is updated for the new rules.
Determine if you want to offer ROTH match: This is only optional and not required. If you decided to offer, ensure your plan document is updated appropriately.
Confirm updates with your payroll provider: Check in with your payroll provider to ensure that new rules are set up properly.
As a participant in your 401(k) plan:
Under 50 (in 2026): Update your employee 401(k) deferral percentage to ensure you max out your 2026 contributions of $24,500.
In your 50s (during 2026): Step up your retirement savings by increasing your 2026 contributions up to $32,500.
Nearing retirement at 60 to 63 (in 2026): Use the new “super” catch-up and increase your 2026 contributions to $35,750.
Using either Catch-Up: Set a reasonable wage that will allow you to make catch-up as traditional or ROTH depending upon your long term planning.
Practice operating income over $500,000 and using Profit Share plan: Consider increasing your wage to the new limit of $360,000 to optimize employer match.
Take a few minutes now to make sure everything is updated for 2026. Then you can move forward knowing everything is set and you have optimized your 401(k) for tax and retirement savings.