The Internal Revenue Service (IRS) has announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2026.
Most of the dollar limits that are subject to adjustment for cost-of-living increases will increase for 2026. The Social Security Administration released separately the maximum amount of earnings subject to the Social Security Tax.
In Depth
The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2025 and 2026.*
| RETIREMENT PLAN LIMITS (guidance link) | 2025 | Δ | 2026 |
| Annual compensation limit | $350,000 | ↑ | $360,000 |
| 401(k), 403(b), and 457(b) before-tax contributions | $23,500 | ↑ | $24,500 |
| Catch-up contributions (if age 50 or older) | $7,500 | ↑ | $8,000 |
| Catch-up contributions (individuals who attain age 60, 61, 62, or 63 in 2026) | $11,250 | ═ | $11,250 |
| Limit on compensation in prior year requiring catch-up contributions to be Roth | N/A | $150,000 | |
| Limit on contributions to emergency savings accounts in defined contribution plans | $2,500 | ↑ | $2,600 |
| In-service withdrawal for victims of domestic abuse limit | $10,300 | ↑ | $10,500 |
| Highly compensated employee threshold | $160,000 | ═ | $160,000 |
| Key employee officer compensation threshold | $230,000 | ↑ | $235,000 |
| Defined benefit plan annual benefit and accrual limit | $280,000 | ↑ | $290,000 |
| Defined contribution plan annual contribution limit | $70,000 | ↑ | $72,000 |
| Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period | $280,000 | ↑ | $290,000 |
| ESOP limit for determining the maximum account balance subject to the general five-year distribution period | $1,415,000 | ↑ | $1,455,000 |
| HEALTH AND WELFARE PLAN LIMITS (guidance links here, here, and here) | 2025 | Δ | 2026 |
| Health Flexible Spending Accounts | |||
| Maximum salary reduction limit | $3,300 | ↑ | $3,400 |
| Health FSA Carryover Limit | $660 | ↑ | $680 |
| Dependent Care Flexible Spending Accounts± | |||
| If employee is married and filing a joint return or if the employee is a single parent | $5,000 | ↑ | $7,500 |
| In employee is married but filing separately | $2,500 | ↑ | $3,750 |
| Excepted Benefit Health Reimbursement Arrangements (EBHRAs) | $2,150 | ↑ | $2,200 |
| Qualified Transportation Fringe Benefit and Qualified Parking (monthly limit) | $325 | ↑ | $340 |
| High-Deductible Health Plans (HDHP) and Health Savings Accounts (HSA) | |||
| HDHP – Maximum annual out-of-pocket limit (excluding premiums): | |||
| Self-only coverage | $8,300 | ↑ | $8,500 |
| Family coverage | $16,600 | ↑ | $17,000 |
| HDHP – Minimum annual deductible: | |||
| Self-only coverage | $1,650 | ↑ | $1,700 |
| Family coverage | $3,300 | ↑ | $3,400 |
| HSA – Annual contribution limit: | |||
| Self-only coverage | $4,300 | ↑ | $4,400 |
| Family coverage | $8,550 | ↑ | $8,750 |
| Catch-up contributions (age 55 or older)± | $1,000 | ═ | $1,000 |
| Direct Primary Care Monthly Membership Fee |
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| Self-Only Coverage | N/A | $150 | |
| Family Coverage | N/A | $300 | |
| SOCIAL SECURITY WAGE BASE (guidance link) | 2025 | Δ | 2026 |
| Social Security Maximum Taxable Earnings | $176,100 | ↑ | $184,500 |
Plan sponsors should update payroll and plan administration systems for the 2026 cost-of-living adjustments and incorporate the new limits into relevant participant communications, like open enrollment materials and summary plan descriptions.
For further information about applying the new employee benefit plan limits for 2026, contact your regular McDermott Will & Schulte lawyer or one of the authors below.
* The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.
± Not indexed for cost-of-living adjustments, with the exception of limited guidance issued for certain years.