401(k) Contribution Types and 2026 Limits
A contribution label determines tax treatment, vesting, testing, payroll handling, and correction. The operational task is to classify every dollar correctly before applying plan terms and annual limits.
Reviewed July 29, 2026 · Source-led practitioner reference
Contribution map
| Type | Who funds it | Key characteristic |
|---|---|---|
| Pretax elective deferral | Employee | Generally reduces current federal taxable income; taxed when distributed |
| Designated Roth deferral | Employee | Included in current income; qualified distributions can be tax-free |
| Catch-up | Eligible employee | Additional deferral after an applicable limit is reached |
| Matching contribution | Employer | Formula is tied to employee contributions |
| Nonelective contribution | Employer | Allocated without requiring an employee deferral |
| Profit-sharing contribution | Employer | Discretionary or formula-based allocation under plan terms |
Selected 2026 limits
- Basic elective deferral: $24,500.
- Age-50 catch-up: $8,000.
- Higher catch-up for participants who turn ages 60–63 during 2026: $11,250.
- Defined contribution annual-additions limit: $72,000.
- Annual compensation limit: $360,000.
Beginning in 2026, catch-up contributions generally must be designated Roth for participants whose prior-year FICA wages from the sponsoring employer exceeded $150,000, when the plan offers catch-ups and the statutory rule applies. Plans and payroll systems need coordinated wage-source, age, limit, and Roth processing.
Payroll-to-trust control
- Apply the plan’s compensation definition and exclusions.
- Aggregate deferrals across applicable plans and payrolls.
- Separate regular, catch-up, Roth, match, and nonelective sources.
- Deposit participant contributions as soon as reasonably segregable from employer assets.
- Reconcile payroll, trust, recordkeeper, and general-ledger totals each pay period.
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Use this public guide for quick orientation and source review. Inside PrepToPay Benefits, you can study the topic in structured lessons, practice applying it, review flashcards, and track your progress across the broader Benefits curriculum.
Primary sources
- IRS Notice 2025-67 — 2026 retirement-plan amounts
- IRS — Retirement topics: contributions
- IRS — Retirement topics: catch-up contributions
- DOL — 401(k) plans for small businesses
Educational reference only. Plan documents, governing law, agency guidance, and plan-specific professional advice control.
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Then determine when employer-funded amounts become nonforfeitable.