With the publication of the August 2025 consumer price index (CPI), 11 of this year’s monthly CPI rates are set and only the September 2025 CPI (scheduled for release on October 15, 2025) remains before the final 2026 annual limits are calculated.
Our initial forecast in March 2025 can be found here. It includes information about the limits for qualified retirement plans, how these limits are calculated, and why they may be relevant for certain plan sponsors.
August 2025 forecast
Historical rolling 12-month changes in the CPI as of each September 30 through 2024, and the current trailing 12-month change through August 31 of the current federal fiscal year (FFY), are shown in Figure 1.
Figure 1: Historical 12-month percentage change each September 30 and current trailing 12-month percentage change through August 31, Consumer Price Index, all items, not seasonally adjusted
Source: U.S. Bureau of Labor Statistics.
The CPI as reported by the BLS for the 12 months ended August 31, 2025, was 2.9%, up from 2.7% for the 12 months ended July 31, 2025, and higher than the 2.4% annual change in the CPI as of September 30, 2024 (i.e., the close of the prior FFY). It is equal to the 2.9% average annual change over the past 10 years ended September 30, 2024, and higher than the 2.6% average annual change over the past 20 years ended September 30, 2024.
As this is our last forecast for the year, our final predictions for the 2026 IRS limits are shown in Figure 2 below. The CPI increased about 2.8% since September 30, 2024. Projecting a monthly increase of 0.25% for September 2025 results in an estimated annual increase factor of 2.9% for our 11-month actual/one-month forecast projection. There was no change in the projected limits from July’s forecast.
If the change in CPI in September is 0.7% or higher, the 2026 compensation limit will be $365,000 instead of $360,000 and the maximum annual addition for DC plans will be $73,000 instead of $72,000. We expect all other limits to be as shown in Figure 2.
Please contact your Milliman consultant for details and questions about how these limits apply to your retirement plan(s).
Figure 2: 2026 IRS Limits Forecast using actual FFY 2025 CPI as of August 31, 2025
| Category of annual IRS limits | 2025 IRS limits | Estimated 2026 IRS limits |
Dollar increases from 2025 limits |
|---|---|---|---|
| Maximum annual annuity pension for DB plans | $280,000 | $290,000 | $10,000 |
| Maximum annual addition for DC plans | $70,000 | $72,000 | $2,000 |
| Maximum §401(k), §403(b), §457 deferral for DC plans | $23,500 | $24,500 | $1,000 |
| Catch-up contribution limit for DC plans* | $7,500 Ages 60 to 63: $11,250 |
$8,000 Ages 60 to 63: $11,250 |
$500 $0 |
| Compensation limit | $350,000 | $360,000 | $10,000 |
| HCE dollar amount | $160,000 | $160,000 | $0 |
| Key employee/officer compensation | $230,000 | $235,000 | $5,000 |
| Contribution limit to ESAs for DC plans | $2,500 | $2,600 | $100 |
| Prior year wage threshold triggering Roth catch-up contributions to DC plans | $145,000 | $150,000** | $5,000 |
* Under SECURE 2.0, plans are permitted (but not required) to increase the catch-up limit for participants ages 60, 61, 62, or 63.
** We assumed this threshold will be indexed for inflation during the two-year transition period ending December 31, 2025.
Source: U.S. Bureau of Labor Statistics. (n.d.) Consumer Price Index. Retrieved September 11, 2025, from https://www.bls.gov/cpi/.
Actual 11-month CPI-U ending August 31, 2025, of 2.8% and 0.25% for September 2025.