For 2026, the 415(c) limit for defined contribution plans caps the total going into a participant’s account at the lesser of $72,000 or 100% of the participant’s compensation for the year.1IRS. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living That ceiling covers every dollar flowing into the account from every source combined: employer contributions, employee deferrals, forfeitures, and voluntary after-tax contributions. The dollar figure rose from $70,000 in 2025 and is adjusted each year for inflation. Breaching it is a qualification defect, so plan sponsors watch the number closely all year long.
What Counts Toward the Limit
Section 415(c) applies to a participant’s “annual additions” for the limitation year, which is usually the plan year. Annual additions include four buckets: employer contributions (matching and profit-sharing), employee elective deferrals (pre-tax and Roth combined), forfeitures reallocated from former participants, and voluntary after-tax employee contributions.2Internal Revenue Service. Retirement Topics – 401(k) and Profit-Sharing Plan Contribution Limits Add those four together and the sum has to stay at or below the ceiling.
Several things flowing into the account don’t count. Rollovers from another qualified plan or IRA are excluded by statute.3Office of the Law Revision Counsel. 26 U.S. Code 415 – Limitations on Benefits and Contribution Under Qualified Plans Loan repayments and investment earnings are also disregarded. Catch-up contributions for participants age 50 and older sit outside the calculation entirely, which effectively raises an older participant’s practical ceiling. Restorative payments made to correct a fiduciary breach or administrative error also fall outside annual additions, as long as they just put the plan back where it would have been.
The Compensation Prong
The limit is the lesser of $72,000 or 100% of compensation, and the compensation side is what trips up lower-paid participants. Someone earning $55,000 has a 415(c) limit of $55,000, not $72,000. For a participant earning $80,000, the $72,000 dollar cap is the binding number.
Compensation for this purpose is broad: wages, salary, bonuses, commissions, and similar pay for services. It also includes amounts the participant diverts pre-tax into the plan, so 415(c) compensation is measured before salary-reduction deductions.
One quirk catches administrators off guard. The 415(c) compensation test is not capped by the separate 401(a)(17) annual compensation limit of $360,000 for 2026.1IRS. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living The 401(a)(17) limit governs nondiscrimination testing and contribution formulas; for 415(c), the plan uses full actual pay. Only very high earners feel this distinction.
Pay received shortly after an employee leaves can still count. Treasury regulations allow amounts paid by the later of 2½ months after the severance date or the end of the limitation year that includes the severance date, as long as the money would have been compensation during employment.4eCFR. 26 CFR 1.415(c)-2 – Compensation Final paychecks, accrued vacation payouts, and bonuses earned before departure typically qualify.
How 415(c) Differs from the 402(g) Deferral Limit
Confusing these two limits is one of the most common errors in plan administration. The 402(g) limit caps only the employee’s own elective deferrals (pre-tax and Roth combined) at $24,500 for 2026.5IRS. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 The 415(c) limit caps total contributions from every source at $72,000. The 402(g) number is one slice of the larger 415(c) pie.
An example: an employee defers $24,500 and the employer contributes $47,500 in match and profit-sharing. Total: $72,000. Neither limit is breached. If the same employee somehow deferred $25,000, the 402(g) limit would be broken even though the overall total stayed under $72,000.
There’s also a structural difference worth knowing. The 402(g) limit applies per individual across every plan they participate in during the calendar year, regardless of employer.6Internal Revenue Service. Consequences to a Participant Who Makes Excess Annual Salary Deferrals Someone with two unrelated jobs who defers $15,000 into each employer’s 401(k) has blown the $24,500 cap. The 415(c) limit works differently: it applies per employer (including controlled groups), so that same person gets a separate $72,000 ceiling at each unrelated employer.
Catch-Up Contributions Sit Outside the Ceiling
Because catch-up contributions aren’t counted as annual additions, they effectively raise the amount that can flow into an eligible participant’s account. The standard catch-up for participants age 50 and over is $8,000 for 2026, up from $7,500 in 2025.5IRS. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 A participant 50 or older can therefore see up to $80,000 land in the account for the year.
SECURE 2.0 added an enhanced catch-up for participants who turn 60, 61, 62, or 63 during the year. For 2026 that enhanced amount is $11,250.1IRS. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living A 61-year-old could receive up to $83,250 total. Participants age 64 and up go back to the standard $8,000.
One more SECURE 2.0 change took effect January 1, 2026: employees who earned $150,000 or more in Social Security wages during the prior year must make all catch-up contributions on a Roth basis. Plans that haven’t updated their systems may either block catch-ups for those employees or run afoul of the new rule.
After-Tax Contributions and the Mega Backdoor Roth
Some plans let participants make voluntary after-tax contributions on top of the regular elective deferral. Those after-tax dollars do count toward the 415(c) total.7Internal Revenue Service. Fixing Common Plan Mistakes – Failure to Limit Contributions for a Participant The room available is whatever’s left after you subtract elective deferrals and employer contributions from $72,000.
Example: a participant defers $24,500, gets $10,000 in employer match, and has $37,500 of unused room under the ceiling. If the plan allows, the participant can fill that gap with after-tax money and then convert it to Roth, the strategy known as the mega backdoor Roth. Not every plan offers it. Attempting this without confirming the plan’s provisions is a reliable way to breach 415(c).
When Multiple Plans or Employers Are Involved
If a single employer sponsors more than one defined contribution plan, all of them count as one plan for 415(c) purposes.3Office of the Law Revision Counsel. 26 U.S. Code 415 – Limitations on Benefits and Contribution Under Qualified Plans Setting up a second plan does not create a second $72,000 ceiling for the same participant. Everything combines against one limit.
The aggregation goes further when businesses share common ownership. Section 414 treats several arrangements as a single employer:
- Controlled groups: corporations connected through 80% or greater ownership chains.
- Commonly controlled trades or businesses: partnerships, sole proprietorships, and other unincorporated businesses under common control.
- Affiliated service groups: service organizations that regularly do work for each other or share significant ownership by highly compensated employees.
Any of these triggers single-employer treatment and forces aggregation of every defined contribution plan across the group.8Office of the Law Revision Counsel. 26 U.S. Code 414 – Definitions and Special Rules A physician who owns both a medical practice and a consulting LLC cannot treat the two as separate employers if the common-control thresholds are met.
Truly unrelated employers with no shared ownership and no affiliated service group relationship are not aggregated. A worker holding two jobs at genuinely separate companies gets a full $72,000 ceiling at each. The usual trouble spot is assuming a side business is unrelated to a main employer when the common-control rules say otherwise.
Contributions to a 403(b) annuity contract are generally not aggregated with a separate 401(a) defined contribution plan, because the participant is treated as maintaining the 403(b) independently.9Internal Revenue Service. Issue Snapshot – 403(b) Plan – Application of IRC Section 415(c) When a 403(b) Plan Is Aggregated with a Section 401(a) Defined Contribution Plan An exception forces aggregation when the participant controls the employer sponsoring the 401(a) plan; in that case both plans have to meet 415(c) individually and together.
One boundary worth noting: defined benefit pension plans and defined contribution plans no longer share a combined limit. Congress repealed the old combined ceiling (former Section 415(e)) in 1996, so a participant can receive a full defined benefit accrual and the full defined contribution annual addition in the same year without one eating into the other.
How the Limit Works for Self-Employed Individuals
Solo 401(k) and profit-sharing plans still have the $72,000 ceiling, but “compensation” means earned income instead of W-2 wages. Earned income starts with net self-employment earnings, then subtracts the deductible half of self-employment tax and the plan contribution itself.10Internal Revenue Service. Calculation of Plan Compensation for Sole Proprietorships
The second subtraction creates a circular problem: the contribution depends on earned income, and earned income depends on the contribution. The IRS resolves it with worksheets and a reduced rate. In rough terms, a self-employed person aiming for a 25% contribution actually applies a 20% rate to net self-employment income (after the SE tax adjustment) to reach the same figure. Skipping that adjustment is one of the quickest ways to breach 415(c) in a strong income year.
What to Do If Contributions Exceed the Limit
Going over 415(c) is a qualification defect, but the IRS has a correction framework through the Employee Plans Compliance Resolution System (EPCRS) that lets sponsors fix the problem without the plan losing its tax-qualified status.11Internal Revenue Service. EPCRS Overview Catching an excess early matters, because disqualification carries serious tax consequences for the trust, the employer, and participants.12Internal Revenue Service. Tax Consequences of Plan Disqualification
How you correct depends on where the excess came from. If the overage traces to employer contributions, the standard fix is to forfeit the excess into an unallocated suspense account, where it sits in the plan and reduces the employer’s required contributions in future years rather than going to any participant.7Internal Revenue Service. Fixing Common Plan Mistakes – Failure to Limit Contributions for a Participant If the overage came from employee elective deferrals, the plan distributes the excess (plus attributable earnings) back to the participant, reports it on Form 1099-R, and the amount is generally taxable in the year distributed.13Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
EPCRS has three correction tracks: the Self-Correction Program, the Voluntary Correction Program, and the Audit Closing Agreement Program. Self-correction lets sponsors fix operational failures without filing anything with the IRS when conditions are met.14Internal Revenue Service. Correcting Plan Errors SECURE 2.0 Section 305 removed the old deadline for self-correcting “eligible inadvertent failures,” so the self-correction window is now effectively open-ended, though the IRS can shut it if it identifies the failure before the sponsor has taken concrete steps to fix it.15IRS. Guidance on Section 305 of the SECURE 2.0 Act For failures that don’t qualify, or when the sponsor wants formal IRS sign-off, the Voluntary Correction Program requires a written submission and a fee.