New Retirement Plan Rules for 2026: What Owners, Employees and Savers Should Do Before Year-End
Retirement contributions are one of the few tax-saving tools available to nearly everyone, whether you own a business, work for one, or are nearing retirement. 2026 brings higher contribution limits and a significant change to how catch-up contributions work for higher earners. Several opportunities also expire on December 31.
Higher limits for 2026
The IRS raised most retirement plan limits for 2026. Employees can defer up to $24,500 into a 401(k), 403(b) or governmental 457 plan. Participants age 50 and older can add a catch-up contribution of up to $8,000, and those ages 60 through 63 can contribute an enhanced catch-up of up to $11,250. The IRA contribution limit is $7,500, with an additional $1,100 for those 50 and older.
The Roth catch-up rule starts in 2026
Under the SECURE 2.0 Act, employees whose prior-year FICA wages from their employer exceeded an inflation-adjusted threshold ($150,000 based on 2025 wages) must make any catch-up contributions as Roth contributions starting in 2026. That means no current-year deduction for those catch-up dollars, though qualified withdrawals later are tax-free.
For employers, this is a payroll and plan administration issue. If your plan doesn’t offer a Roth option, affected employees may not be able to make catch-up contributions at all. Confirm with your plan provider and payroll company that they are applying the rule correctly.
For business owners: it’s not too late to start a plan
Many owners assume that a retirement plan for 2026 has to be set up by December 31. In many cases, that’s no longer true:
- Employer-funded plans. A new profit-sharing or other employer-funded plan can often be adopted after year-end, up to the due date of the business’s tax return, and still count for 2026.
- Solo 401(k)s. Sole proprietors and single-member LLC owners can establish a new solo 401(k) after year-end and still make employee deferrals for the plan’s first year, up to the return due date.
- Startup credits. Small employers that start a new plan may qualify for a tax credit that covers a large share of startup costs for three years, plus additional credits for automatic enrollment and employer contributions.
- Cash balance plans. Owners of profitable practices and firms, including healthcare and professional services, may be able to deduct significantly more through a cash balance plan paired with a 401(k).
Connecticut employers with five or more employees that don’t offer a qualified plan must generally participate in the state’s MyCTSavings program. Offering your own plan satisfies that requirement and may give you more flexibility.
For individuals: year-end moves
- Max out deferrals through payroll. 401(k), 403(b) and 457 deferrals must come from 2026 paychecks. If you’re behind, ask HR to increase your contribution for the remaining pay periods.
- Take required minimum distributions. If you’re required to take an RMD for 2026, it generally must be taken by December 31. Missed RMDs carry a penalty.
- Consider a Roth conversion. If 2026 income is lower than usual, converting some traditional IRA money to a Roth may make sense. Conversions must be completed by December 31, and the added income can affect other deductions and phase-outs, so run the numbers first.
- IRA contributions can wait. Traditional and Roth IRA contributions for 2026 can be made until April 15, 2027.
Looking ahead to 2027
Starting in 2027, the Saver’s Credit becomes the Saver’s Match, a federal matching contribution deposited into eligible lower- and moderate-income workers’ retirement accounts. Employers may want to communicate this to their teams next year.
Let’s review your plan
Whether you want to start a plan, check that your current plan is ready for the Roth catch-up rule, or plan your own year-end contributions, your Accavallo & Company advisor can help.
