IRC 415 Limits on Retirement Benefits and Contributions

Under Internal Revenue Code Section 415, the IRC 415 limits cap how much can flow into or out of a tax-qualified retirement plan for any one participant. For 2026, a defined contribution plan can allocate no more than the lesser of $72,000 or 100% of your compensation to your account, and a defined benefit plan can pay no more than the lesser of $290,000 or 100% of your highest three-year average compensation as an annual benefit.¹ The ceilings exist to stop highly paid employees from parking unlimited income inside a qualified plan. A plan that ignores them can lose its qualified status, with tax consequences for every participant.

The Defined Contribution Ceiling

Defined contribution plans include 401(k)s, profit-sharing plans, money purchase plans, and 403(b) arrangements. The 2026 cap on “annual additions” to any single participant’s account is the lesser of $72,000 or 100% of compensation.¹ If you earn $55,000, your ceiling is $55,000, not $72,000. The compensation percentage binds first.

Annual additions cover everything credited to your account during the plan’s limitation year: your own elective deferrals (pre-tax, Roth, or after-tax), all employer contributions (matching, profit-sharing, non-elective), and any forfeitures from departing participants that get reallocated to you.²

Sitting inside the $72,000 ceiling is a separate, smaller limit on what you personally can defer from your paycheck. Section 402(g) caps elective deferrals at $24,500 for 2026.³ Employer contributions and forfeitures fill the space between your $24,500 deferral cap and the $72,000 annual-addition cap.

The “limitation year” defaults to the calendar year unless the plan document picks a different 12-month period.⁴ Most plans use the calendar year. Fiscal-year plans apply the 415 test to their own 12-month period.

The Defined Benefit Ceiling

Traditional pensions work differently. Section 415 does not cap what goes into a defined benefit plan; it caps what comes out. The 2026 ceiling is the lesser of $290,000 or 100% of your average compensation during your three highest-paid consecutive years.¹ The $290,000 is measured as a straight life annuity beginning at Social Security retirement age.

Starting the pension earlier reduces the dollar limit to account for the longer payment stream. Delaying past Social Security retirement age allows a modest increase. Other benefit forms (joint-and-survivor, lump sum) get converted using actuarial assumptions set by Treasury regulations.

There is no longer a combined ceiling when someone participates in both a defined benefit and a defined contribution plan from the same employer. Congress repealed the old combined limit (former Section 415(e)) effective in 2000. You can receive the full permitted benefit under each type of plan at the same time. The employer’s own tax deduction limit under Section 404(a)(7) is what usually constrains funding both plans to the maximum.

Catch-Up Contributions Sit Outside the 415 Cap

Catch-up contributions are excluded from the annual-addition limit, and that exclusion is the whole point.⁵ If they counted toward the $72,000, they’d add no extra savings room.

For 2026, the catch-up for participants aged 50 and older is $8,000 in 401(k), 403(b), and governmental 457(b) plans. Under SECURE 2.0, participants who turn 60, 61, 62, or 63 during 2026 get an enhanced catch-up of $11,250.³ A 62-year-old in 2026 could defer as much as $35,750 personally ($24,500 regular plus $11,250 enhanced catch-up), and total annual additions with employer money could run well above the standard $72,000 ceiling.

Once you turn 64, you drop back to the standard $8,000 catch-up. Participants under 50 get no catch-up.¹

Mandatory Roth Catch-Ups for High Earners

Beginning January 1, 2026, SECURE 2.0 Section 603 requires catch-up contributions to be made on a Roth (after-tax) basis if the participant’s FICA wages from the prior year exceeded a statutory threshold.⁶ The base threshold was $145,000, indexed for inflation, and preliminary guidance from several plan administrators has placed the relevant figure at $150,000 in 2025 wages for determining 2026 treatment. If your prior-year wages exceeded that level, your 2026 catch-up must go into a Roth account. You still get the extra contribution room, but not the upfront tax deduction on those dollars.

How Compensation Gets Measured

Section 415 references compensation constantly, and Treasury regulations give plans three safe-harbor definitions to choose from: Section 3401(a) wages, the broader wages-reported-for-tax-purposes definition, and a simplified definition.⁷ The plan document specifies which one applies. Using the wrong one is a frequent cause of qualification failures.

Whichever definition a plan picks, a separate cap limits how much of any individual’s pay can feed into contribution or benefit calculations. For 2026, the annual compensation cap under Section 401(a)(17) is $360,000.¹ Earn $500,000 and the plan treats you as if you earned $360,000 for percentage-based contribution formulas and benefit accruals.

Self-Employed Participants

If you’re self-employed, Section 415 substitutes “earned income” for compensation.² Earned income under Section 401(c)(2) is net self-employment earnings minus the deductible half of self-employment tax and minus your own retirement contribution. Because the contribution itself reduces the income base used to calculate the contribution, the math is circular. A self-employed person’s effective contribution rate always ends up lower than an employee’s rate on the same gross income. Solo 401(k) and SEP setups stumble here most often.

When Plans Get Combined

Section 415 does not look at each plan in isolation. All defined contribution plans maintained by the same employer are aggregated and share one $72,000 ceiling per participant; defined benefit plans are aggregated separately.⁸ An employer running both a 401(k) and a profit-sharing plan cannot give you $72,000 in each.

Common ownership pulls separate companies into the same test. Businesses that form a controlled group under Sections 414(b) and (c) count as one employer, and for Section 415 purposes the ownership threshold is more than 50%, stricter than the 80% threshold used elsewhere in the Code.⁹ Own 55% of two corporations and the combined annual additions from both companies’ 401(k) plans share one $72,000 ceiling.

The 403(b) Wrinkle

A 403(b) annuity is generally treated as controlled by the individual participant, so it usually does not aggregate with a 401(a) defined contribution plan. The exception: if you control the employer sponsoring the 401(a) plan, the 403(b) and the 401(a) plan each have to satisfy Section 415(c) independently and on a combined basis.¹⁰ Physicians who contribute to a hospital 403(b) and also run their own medical practice with a 401(k) frequently fall into this trap.

Fixing an Excess

When annual additions blow through the 415(c) limit, the plan has to correct the mistake or risk disqualification. The IRS’s Employee Plans Compliance Resolution System prescribes a specific order:¹¹

Distribute unmatched elective deferrals, adjusted for earnings, back to the participant.
If excess remains, distribute matched elective deferrals and forfeit the related employer match.
If excess still remains, forfeit employer profit-sharing or non-elective contributions.

The corrective distribution is reported on Form 1099-R as taxable income in the year of distribution. The 10% early distribution penalty under Section 72(t) does not apply, and you cannot roll the corrective distribution into an IRA or another qualified plan.¹¹ Forfeited employer contributions go into an unallocated suspense account and reduce future employer contributions.

Defined benefit 415(b) failures are handled by reducing the accrued benefit to the maximum permissible level, which usually means amending the plan document or adjusting actuarial factors. Minor or timely-corrected problems can be handled through Self-Correction. Larger or older failures need a Voluntary Correction Program submission with an IRS filing and a compliance fee.

2026 Numbers at a Glance

The IRS adjusts Section 415 dollar limits each fall for the following year using changes in the Consumer Price Index. Adjustments round to set increments ($1,000 for defined contribution limits, $5,000 for defined benefit limits), so small inflation changes sometimes produce no increase.¹² The 2026 figures from IRS Notice 2025-67:¹

Defined contribution annual addition: $72,000
Defined benefit annual benefit: $290,000
Elective deferral limit under 402(g): $24,500
Annual compensation cap under 401(a)(17): $360,000
Catch-up contributions, age 50+: $8,000
Enhanced catch-up, ages 60 through 63: $11,250

Plan administrators update their systems each year when the IRS releases the new numbers, usually in late October or November. Running the prior year’s limits against current-year contributions is the exact administrative error that produces 415 failures and forced corrective distributions.

1
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living
2
Office of the Law Revision Counsel. 26 US Code 415 – Limitations on Benefits and Contribution Under Qualified Plans
3
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
4
eCFR. 26 CFR 1.415(j)-1 – Limitation Year
5
eCFR. 26 CFR 1.414(v)-1 – Catch-Up Contributions
6
Thrift Savings Plan. SECURE Act 2.0, Section 603 – Impacts to Thrift Savings Plan
7
eCFR. 26 CFR 1.415(c)-2 – Compensation
8
eCFR. 26 CFR 1.415(f)-1 – Aggregating Plans
9
Internal Revenue Service. Controlled and Affiliated Service Groups
10
Internal Revenue Service. 403(b) Plan Application of IRC Section 415(c) When a 403(b) Plan is Aggregated with a Section 401(a) Defined Contribution Plan
11
Internal Revenue Service. Fixing Common Plan Mistakes – Failure to Limit Contributions for a Participant
12
Internal Revenue Service. COLA Increases for Dollar Limitations on Benefits and Contributions