Share the 2026 Cost-of-Living Adjustment with Your Clients

The IRS recently announced the Cost-of-Living Adjustment (COLA) with the defined contribution plan annual additions limit increasing from $70,000 to $72,000. The COLA percentage increased to 2.8% from 2.5% in 2025. For financial professionals working with retirement plan sponsors or highly compensated employees, share this important adjustment with your plan sponsors and their plan participants. Consider potential changes to their plans as soon as possible to help ensure they stay on track for retirement.

What is the cost-of-living adjustment?

Intended to ensure that the purchasing power of wages or benefits remains stable despite rising prices, the COLA is an annual, federally set guideline that indicates an appropriate increase in benefits and contributions to counteract inflation. It’s based on the percentage increase in the average Consumer Price Index (CPI) between the third quarters of the current and previous years.

How will the updated COLA affect retirement plans?

The new cost-of-living adjustment will affect the contribution limits for various retirement plans, including 401(k), 403(b) and 457 plans. For participants aged 50 and above, the catch-up contribution limits will also be adjusted. This change allows older employees to contribute more towards their retirement savings, helping them better prepare for their future. This year’s notice also includes the SECURE 2.0 Super Catch-up amount for participants ages 60-63 for 401(k), 403(b) and 457 plans.

Review our updated chart on the increased limits for benefits and compensation.

What’s particularly important about this most recent COLA announcement?

Today’s retirement savers face continuing challenges with inflation, high interest rates and global uncertainty. Fortunately, the Social Security Administration’s 2.8% cost-of-living adjustment is slightly higher than last year, and new IRS limits—$24,500 for 401(k)s and $7,500 for IRAs—give participants an opportunity to save more.

Importantly, the COLA also updates the compensation limits for determining contributions to retirement plans. If you have highly compensated employees who are not contributing as much as they might to help ensure their future stability, it may be a good opportunity to review the entire retirement plan strategy.

How to make the most of the IRS COLA announcement

First, take time to review our updated chart on the increased limits for benefits and compensation. Then, consider taking the following steps to help inform your retirement plan sponsors and their plan participants.

Review and update plans: Ensure all sponsored retirement plans are updated with the new contribution and compensation limits.

Schedule plan sponsor meetings: Discuss how the new COLA affects their retirement strategies and identify any new gaps or opportunities that their plan could address.

Provide educational materials: Share updated materials and resources with your plan sponsors explaining the changes and their implications. Ameritas offers a comprehensive range of participant-ready educational materials that cover many elements of the retirement planning process. Contact us today to learn more.

Read additional information about the 2026 cost-of-living adjustment announcement from the IRS. 

Disclosures

Representatives of Ameritas do not provide tax or legal advice. Please refer clients to their tax advisor or attorney regarding their specific situation.