Happy New Year from the K&C ESOPs, Benefits & Compensation team! We hope 2026 is treating you well.
The past year saw a number of significant benefits changes, so as we close out 2025 and look toward 2026, we hope you’ll find these updates helpful. As always, please feel free to reach out to any member of our team to discuss these or any other benefits topics.
Mandatory Roth Catch-Up Contributions in Effect for 2026
After a two-year delay and some heartburn for employers and plan vendors, the SECURE 2.0 requirement for certain high earners to make Roth catch-up contributions has finally arrived. Starting in 2026, employees who earned over a certain threshold in the previous year will only be eligible to make after-tax Roth catch-up contributions in the current year. A few reminders as this new rule takes effect:
- The wage threshold is $150,000 for 2025. This means if an employee earned over $150,000 in 2025, they will only be eligible for Roth catch-up contributions in 2026.
- The wage threshold is based on the employee’s box 3 wages on their Form W-2. It only applies to wages actually paid by the same employer in the prior year.
- The wage threshold can increase annually, so employers need to keep a close eye on the affected population as it changes from year to year.
- Employers can choose to either (1) automatically switch pre-tax contributions to Roth contributions once the employee reaches the regular annual limit, or (2) require employees to affirmatively elect Roth catch-up contributions once they reach the regular limit.
- If the plan does not allow Roth contributions, affected employees will not be able to make catch-up contributions at all.
If plan sponsors have not finalized their processes for this rule, now is the time.
One Big Beautiful Bill Act Provisions Taking Effect in 2026
Under the 2025 “One Big Beautiful Bill Act,” a few other employee benefits rules will first take effect in 2026:
- Dependent Care FSA limits, long stuck at $5,000, will increase to $7,500. Unfortunately, the new limit is not indexed for inflation, so will remain static until increased again by legislation.
- Employees may be covered by a direct primary care arrangement while remaining eligible to contribute to a health savings account. While the IRS has issued preliminary guidance, many issues are still pending finalization, with regulations expected to be issued to clarify these open points.
New 2026 Plan Limits
As always, a new year brings new plan limits and cost-of-living increases:
- 401(k), 403(b), and 457(b) deferrals: $24,500 (up from $23,500)
- Regular Catch-Up Contributions (age 50+): $8,000 (up from $7,500)
- “Super” Catch-Up Contributions (ages 60-63): $11,250 (no change)
- Maximum Contribution Limit: $72,000 (up from $70,000)
- Regular IRA Contribution Limit: $7,500 (up from $7,000)
- IRA Catch-Up Contributions: $1,100 (up from $1,000)
- ESOP Large Account Distribution Threshold: $1,455,000 (up from $1,415,000)
No More 1095-C Distribution Requirement
Finally, although originating from a late-2024 legislative change, many “large” employers subject to the ACA may be encountering for the first time a 1095 filing season without being required to distribute Form 1095-Cs to employees. As a reminder, before last year, large employers were required to both file Form 1095-Cs with the IRS and distribute a copy to each employee. Now, large employers are still required to complete and file the forms with the IRS but are no longer required to distribute copies to all employees (but may do so if they choose).
To take advantage of this rule, employers need to provide a notice to employees, allow them to request copies of their form, and provide copies upon request.
Large employers seeking to use this alternative should coordinate with benefits broker or filing vendor to ensure the proper notice is posted by March 2, 2026.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2026.
