Kasia S. Crain, Author at Spotlight on Benefits

IRS Announces 2026 Retirement Plan Limits

The Internal Revenue Service (IRS) recently announced the 2026 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans. The IRS modestly increased the applicable limits for 2026. The following limits apply to retirement plans in 2026:

The limit on elective deferrals under 401(k), 403(b) and eligible 457(b) plans increased to $24,500.
The limit on catch-up contributions by participants aged 50 or older is increased to $8,000. This means that the maximum amount of elective deferral contributions for those participants in 2026 is $32,500.
The enhanced catch-up contribution limit for those ages 60-63 in 2026 did not change and remains $11,250. This means that the maximum amount of elective deferral contributions for these participants in 2026 is $35,750.
The Internal Revenue Code (Code) Section 415 annual addition limit is increased to $72,000 for 401(k) and other defined contribution plans, and the annual benefit limit is increased to $290,000 for defined benefit plans.
The limit on the annual compensation that can be taken into account by qualified plans under Code Section 417 is increased to $360,000.
The dollar level threshold for becoming a highly compensated employee under Code Section 414(q) remains $160,000 (which, under the look-back rule, applies to HCE determinations in 2027 based on compensation paid in 2026).
The dollar level threshold for becoming a “key employee” in a top-heavy plan under Code Section 416(i)(1) is increased to $235,000.
The Roth catch-up wage threshold is increased to $150,000 (which applies to determinations in 2026 based on FICA wages in 2025).

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One Big Beautiful Bill: How It Affects Health Savings Account Administration

The One Big Beautiful Bill (OBBB), signed into law July 4, 2025, made several changes to Health Savings Account (HSA) rules. While not mandatory, some employers may want to consider whether to modify their HSA programs accordingly.

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Affordable Care Act Penalty and Reporting Relief

The Employer Reporting Improvement Act and the Paperwork Burden Reduction Act (PBA), each signed into law in December 2024, provide the following penalty and reporting relief for plan sponsors required to provide minimum essential coverage in accordance with the requirements of the Patient Protection and Affordable Care Act (ACA):

An individual’s date of birth may be used as a substitute when the individual does not have a tax identification number (TIN) for ACA reporting due in 2025 and after.

Reminder: Until further guidance is issued, to ensure that the reasonable cause exception from ACA reporting penalties is retained, plan sponsors should continue to solicit the individual’s TIN three times: (i) as part of the application for enrollment in the plan, (ii) within 75 days after the application is received and (iii) by December 31 of the year after the initial solicitation.

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