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.
July 2025 forecast
Our limits forecast is projected using two assumption sets. One set is based on the current trailing 12 months of the consumer price index (CPI), and the second assumes that year-to-date CPI (since September 30, 2024) will continue to increase each month through September 30, 2025, by an estimated 25 basis points (3.0% annual).
Figure 1 shows the historical rolling 12-month changes in the CPI as of each September 30 through 2024, and through July 31 for the current federal fiscal year (FFY).
Figure 1: Historical 12-month percentage change each September 30, 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 July 31, 2025, was 2.7%, the same as the CPI reported for the 12 months ended June 30, 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 lower than 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.
Since September 30, 2024, the CPI has increased about 2.5%. Projecting monthly increases of 0.25% through September 2025 results in an estimated annual increase factor of 2.8% for our 10-month actual/two-month forecast projection.
Figure 2 shows the limits forecasts under both assumption sets. There was no change in the projected limits from July’s forecast.
As previously noted, one of our projection scenarios assumes that CPI increases 0.25% per month through September (i.e., about 0.50% for the next two months). To gauge how sensitive our projected limits are, we calculated the smallest CPI changes for August and September 2025 that would cause any of the estimated limits to move up or down relative to this July forecast. The results are shown below (using the IRS rounding rules).
Change in CPI for August and September 2025 | Change in estimated 2026 IRS limits |
---|---|
Increase of about 0.42% per month, i.e., about 0.85% for two months | Increase in the compensation limit and maximum annual addition for defined contribution (DC) plans compared to the July forecast |
Decrease of about 0.27% per month, i.e., about 0.53% for two months | Decrease in the maximum annual annuity pension for defined benefit (DB) plans compared to the July forecast |
The BLS is expected to release the August CPI results on September 11, 2025, at which time this forecast will be updated.
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 July 31, 2025
Category of annual IRS limits | 2025 IRS limits | Estimated 2026 IRS limits | Dollar increases from 2025 limit | ||
---|---|---|---|---|---|
Actual 12-month trailing CPI as of 7/31/2025 | 10-month actual 7/31/2025, 2-month forecast to 9/30/2025 | Actual 12-month trailing CPI as of 7/31/2025 | 10-month actual 7/31/2025, 2-month forecast to 9/30/2025 | ||
Maximum annual annuity pension for DB plans | $280,000 | $290,000 | $290,000 | $10,000 | $10,000 |
Maximum annual addition for DC plans | $70,000 | $72,000 | $72,000 | $2,000 | $2,000 |
Maximum §401(k), §403(b), §457 deferral for DC plans | $23,500 | $24,500 | $24,500 | $1,000 | $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 |
$8,000 Ages 60 to 63: $11,250 |
$500 $0 |
$500 $0 |
Compensation limit | $350,000 | $360,000 | $360,000 | $10,000 | $10,000 |
HCE dollar amount | $160,000 | $160,000 | $160,000 | $0 | $0 |
Key employee/officer compensation | $230,000 | $235,000 | $235,000 | $5,000 | $5,000 |
Contribution limit to ESAs for DC plans | $2,500 | $2,600 | $2,600 | $100 | $100 |
Prior year wage threshold triggering Roth catch-up contributions to DC plans | $145,000 | $150,000** | $150,000** | $5,000 | $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 August 12, 2025, from https://www.bls.gov/cpi/.
Actual 12-month trailing CPI for All Urban Consumers (CPI-U) of 2.7% ending July 31, 2025.
Actual 10-month CPI-U ending July 31, 2025, of 2.5% and 0.25% per month for August and September 2025.