By The IRS has announced retirement contribution limits for 2027, raising the 401(k) elective deferral limit to $25,500, up from $24,500 in 2026, according to HRMorning. The change also applies to 403(b) and most 457(b) plans.
The standard catch-up contribution for employees age 50 and older remains at $8,500, bringing their total possible deferral to $34,000. A higher catch-up of $11,750 applies to employees who turn 60, 61, 62, or 63 during 2027, for a total of $37,250. The higher catch-up replaces the standard one; employees cannot combine the two.
What changed from 2026 to 2027
The core deferral limit increased by $1,000, continuing a pattern of periodic inflation-driven adjustments. The standard catch-up amount stayed flat at $8,500, while the special catch-up for employees in the 60-to-63 age band rose from $11,250 in 2026 to $11,750 in 2027.
The Roth catch-up threshold also moved. Employees whose 2026 FICA wages from the plan sponsor exceed $155,000 generally must make 2027 catch-up contributions as Roth contributions. For 2026 catch-ups, the threshold was $150,000 based on 2025 wages. This threshold applies only to catch-up contributions, not to regular elective deferrals.
What the higher limits do not do
The new limits do not automatically change any employee’s deferral election. Payroll and HR teams should not assume that an employee who contributed the maximum in 2026 will automatically defer the new maximum in 2027. Employees must review their current elections and follow plan procedures to increase contributions.
Catch-up contributions are only available if the plan document permits them. Employers that do not offer catch-up provisions are not required to add them because of the IRS announcement. The same applies to the special 60-to-63 catch-up: a plan must specifically allow it.
Payroll considerations for 2027
Payroll teams will need to update contribution limit fields in their payroll and HR systems before the first 2027 pay period. The key figures to load are $25,500 for regular deferrals, $8,500 for the standard catch-up, and $11,750 for the 60-to-63 catch-up.
The Roth catch-up rule creates a separate payroll task. For employees who earned more than $155,000 in FICA wages from the sponsoring employer in 2026, catch-up contributions in 2027 generally must be designated as Roth. Payroll should identify those employees before January 2027 and confirm that the plan and payroll system can process Roth catch-up contributions correctly.
Employers should also check whether their plan document references the 2026 limits. Some plans incorporate limits by reference to the Internal Revenue Code, which updates automatically. Others list dollar amounts in the plan text and may need an amendment, though the IRS typically allows plans to operate in accordance with new limits while amendments are pending.
How the 60-to-63 catch-up works
The higher catch-up applies to employees who turn 60, 61, 62, or 63 at any point during 2027. An employee who turns 60 on December 31, 2027, qualifies for the higher amount for the entire year, assuming the plan allows it.
An employee who turns 64 in 2027 does not qualify for the higher catch-up that year. That employee falls back to the standard $8,500 catch-up, if eligible. An employee who turns 59 in 2027 also does not qualify for the higher amount until the year they turn 60.
The higher catch-up replaces the standard catch-up. An eligible employee in the 60-to-63 band cannot contribute both $8,500 and $11,750 as catch-up amounts. The total catch-up for that employee is capped at $11,750.
Steps for HR and payroll teams
HR teams should communicate the new limits to employees before the 2027 plan year begins. The message should state the new deferral limit, the catch-up amounts, and the fact that elections do not change automatically. Employees who want to contribute more must submit a new election.
Payroll teams should coordinate with plan recordkeepers to confirm that systems will accept the new limits and correctly apply the Roth catch-up rule. Testing before the first 2027 payroll is prudent, particularly for plans with many employees near the $155,000 FICA wage threshold.
Employers with multi-state workforces should note that the federal limits apply nationwide. State tax treatment of retirement contributions varies, and payroll should confirm state-specific rules where relevant.
| Provision | 2026 limit | 2027 limit |
|---|---|---|
| Elective deferral | $24,500 | $25,500 |
| Standard catch-up, age 50+ | $8,500 | $8,500 |
| Special catch-up, age 60-63 | $11,250 | $11,750 |
| Roth catch-up wage threshold | $150,000 | $155,000 |
The IRS announcement gives employers and payroll providers roughly a year to prepare. The practical work is less about the limit itself and more about elections, system updates, and the Roth catch-up threshold.
Sources: HRMorning
Photo: Pension and Welfare Benefits Administration - National Summit on Retirement Savi by Department of Labor. Office of Public Affairs. Division of A, Public domain
