On November 12, 2026, the IRS announced the 2027 cost-of-living adjustments for retirement plans (Notice 2026-66). The 401(k) employee deferral limit rises $1,000 to $25,500.
2027 limits at a glance
| Limit | 2026 | 2027 |
|---|---|---|
| Employee elective deferral | $24,500 | $25,500 |
| Catch-up, age 50 and older | $8,000 | $8,500 |
| Maximum deferral, age 50–59 and 64+ | $32,500 | $34,000 |
| Catch-up, ages 60–63 (SECURE 2.0) | $11,250 | $11,750 |
| Maximum deferral, ages 60–63 | $35,750 | $37,250 |
| Total annual additions, §415(c) (employee + employer) | $72,000 | $75,000 |
| Compensation cap, §401(a)(17) | $360,000 | $375,000 |
| Limit | 2026 | 2027 |
|---|---|---|
| Traditional + Roth IRA (combined) | $7,500 | $7,500 (no change) |
| IRA catch-up, age 50+ | $1,100 | $1,100 (no change) |
| SIMPLE IRA / SIMPLE 401(k) deferral | $17,000 | $17,500 |
| SIMPLE deferral, certain qualifying plans | $18,100 | $19,100 |
| SIMPLE catch-up, age 50+ (standard / ages 60–63) | $4,000 / $5,250 | $4,000 / $5,250 (no change) |
The age 50 and age 60–63 totals above are the employee deferral limit plus the applicable catch-up. Age is measured at the end of the calendar year. Employer matching and profit-sharing contributions are separate and count toward the §415(c) limit, not the employee deferral limit.
Other changes that matter in 2027
- Roth catch-up threshold rises to $155,000. Under SECURE 2.0, employees whose prior-year FICA wages from the plan sponsor exceed the threshold must make catch-up contributions on a Roth (after-tax) basis. The threshold was $150,000 for 2026. Catch-up contributions for these employees will not reduce 2027 taxable income.
- Saver’s Match replaces the Saver’s Credit for retirement accounts. Beginning in 2027, eligible low- and moderate-income savers may receive a federal match of up to 50% of the first $2,000 contributed (maximum $1,000), deposited directly into the retirement account. It is claimed on Form 8880-A with the 2027 return, filed in 2028.
- IRA income phase-out ranges increase. The traditional IRA deduction and Roth IRA contribution ranges move up for 2027, so some taxpayers who were limited or excluded in 2026 may qualify. Confirm the exact range for each filing status in Notice 2026-66 before advising on a specific case.
Compliance risks and audit red flags
- Excess deferrals across multiple employers. The elective deferral limit is per person, not per plan. A taxpayer who changes jobs mid-year or holds two employers’ plans can exceed $25,500 without either payroll department noticing. Excess amounts must be distributed by April 15 of the following year; otherwise they are taxed in the year contributed and again when distributed.
- Roth catch-up administration errors. Plans that fail to route catch-ups for higher earners to Roth accounts, or that lack a Roth feature, create operational failures for the sponsor. Employers should confirm payroll coding and plan document language before January 1.
- Owner-employees and controlled groups. Business owners with more than one plan or entity must test the §415(c) limit across the controlled group, not entity by entity.
- IRA deduction and Roth eligibility. Contributing is not the same as deducting. Excess Roth contributions carry a 6% annual excise tax until corrected.
- Plan amendments. Plan documents that hard-code dollar limits instead of referencing the IRS-indexed amounts may need to be updated.
Federal limits are shown. State income tax treatment of elective deferrals varies by state; confirm treatment for your state of residence.
Action items before January 1
- Update payroll deferral elections. To reach $25,500 over 26 biweekly pay periods, defer about $981 per paycheck ($2,125 per month on a monthly schedule), before any catch-up.
- Confirm the employer match formula and contribute at least enough to capture it. Employer contributions do not reduce the employee limit.
- Age 50+: add the catch-up. If you turn 60, 61, 62 or 63 during 2027, the higher $11,750 catch-up applies.
- Higher earners: ask your plan administrator whether 2027 catch-ups will be Roth, based on 2026 FICA wages above $155,000.
- Business owners: review plan design, safe harbor and profit-sharing funding, and the new $75,000 and $375,000 limits. Notify employees of any changes.
- Coordinate with your 2027 tax projection. Pre-tax versus Roth is a tax-rate decision, not only a savings decision.
In plain language
Starting January 1, you can put $1,000 more into your 401(k) than you could this year, for a maximum of $25,500. If you are 50 or older, you can add another $8,500 on top of that. If you are 60 to 63, the extra amount is $11,750.
The limit for IRAs stays the same at $7,500, so any extra savings room this year is in your workplace plan.
If you earn more than $155,000 from your employer and are 50 or older, your extra “catch-up” savings will go into a Roth account. That means you will not get a tax deduction now, but you can withdraw the money tax-free later if the rules are met.
The most useful step you can take is to log in to your payroll or benefits portal in December and raise your contribution percentage for 2027. If you are unsure how much to contribute, we can run the numbers with you.
Talk to us about your 2027 plan
We help individuals, business owners and plan sponsors set contribution strategies, project the tax effect, and avoid excess-contribution and plan-compliance problems.
Roger S Kim CPA PLLC
333 Jericho Tpke., Suite 106, Jericho, NY 11753
Telephone: 866-585-1040 · 347-276-2610
Fax: 866-585-1040
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