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.
May 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 May 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 May 31, 2025, was 2.4%, up from 2.3% for the 12 months ended April 30, 2025, and equals the rounded 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 the 2.6% average annual change over the past 20 years ended September 30, 2024.
Since September 30, 2024, the CPI has increased by about 2.0%. Projecting monthly increases of 0.25% through September 2025 results in an estimated increase factor of 2.8% for our eight-month actual/four-month forecast projection.
Figure 2 shows the limits forecasts under both assumption sets. Values that changed from the April forecast are in bold. The only change in the limits from our April forecast is the following:
- The defined benefit (DB) plan benefit limit using the 12-month trailing CPI methodology increased from $285,000 to $290,000, while the amount under the year-to-date CPI method remained at $290,000.
The BLS is expected to release the June CPI results on July 15, 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 May 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 5/31/2025 | 8-month actual 5/31/2025, 4-month forecast to 9/30/2025 | Actual 12-month trailing CPI as of 5/31/2025 | 8-month actual 5/31/2025, 4-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 June 11, 2025, from https://www.bls.gov/cpi/.
Actual 12-month trailing CPI for All Urban Consumers (CPI-U) of 2.4% ending May 31, 2025.
Actual eight-month CPI-U ending May 31, 2025, and 0.25% per month for June through September 2025.