401(k) Questions for 2026: Limits, Vesting, Loans and Rollovers

A 401(k) is an employer-sponsored retirement plan whose contribution limits and access rules must be checked separately. For 2026, the standard employee deferral limit is $24,500, with age-based catch-ups if permitted. Employer matches, vesting, loans and rollovers depend on plan terms as well as federal tax rules, so confirm both before changing an election.

Use the 2026 contribution limits

The IRS 2026 retirement limit announcement and Notice 2025-67 provide the indexed amounts below. These are general limits for a standard 401(k), not SIMPLE 401(k) or starter-plan limits. Compensation, plan terms and testing can further restrict contributions.

For 2026, a participant eligible for the ordinary catch-up can generally defer up to $32,500 in a permitting plan. At ages 60–63, the special catch-up can bring that total to $35,750 for 2026. Age is determined under the applicable year-end rules. Neither catch-up automatically increases an employer match, and the two catch-up amounts are not cumulative.

Beginning in 2026, applicable catch-up contributions must be Roth for employees whose prior-year wages from the sponsoring employer exceed the relevant threshold. For 2026 catch-ups, that threshold is $150,000 of 2025 wages under the applicable rules. Ask payroll and the administrator how the rule applies to your wage history; it does not mean every contribution by a higher-paid employee must be Roth.

Keep employee deferrals, employer funding and IRAs separate

Traditional and designated Roth 401(k) salary deferrals share the employee limit; choosing both does not double it. Employer matching and nonelective contributions do not use that employee deferral allowance, but they generally count toward the separate annual-additions limit. After-tax employee contributions, when allowed, also require separate tracking. A rollover is not an ordinary annual contribution and should not be entered as a payroll deferral.

An individual retirement arrangement (IRA) has a separate contribution limit shared across traditional and Roth IRAs. For 2026, traditional IRA deduction phaseouts for a contributor covered at work are $81,000–$91,000 for single filers and $129,000–$149,000 for married filing jointly. For an uncovered contributor married to a covered spouse, the 2026 joint range is $242,000–$252,000. Separate-return rules differ. Direct Roth IRA contributions also have income limits; the 2026 ranges are $153,000–$168,000 for single filers and heads of household and $242,000–$252,000 for joint filers. Verify filing status and modified income before assuming a deduction or Roth eligibility.

Read eligibility, matching and vesting provisions

The plan's Summary Plan Description should explain when employees can participate, how compensation is defined and how matching contributions are calculated. Do not assume every employee can enroll immediately or that a match applies to every kind of pay. Ask whether the plan provides a year-end true-up before changing contribution timing, because front-loading deferrals may affect matching under some formulas.

Employee salary deferrals belong to the employee, but some employer contributions may be subject to a vesting schedule. Vesting determines ownership of employer-funded amounts; it does not guarantee investment gains or immediate withdrawal rights. Review beneficiary designations, investment fees and account statements alongside the contribution election. These are separate decisions from choosing a health plan or a pretax medical account.

Understand loans and distributions before requesting money

A plan may allow participant loans but is not required to do so. The administrator must confirm the available amount, repayment schedule and consequences of missed payments or leaving employment. A compliant loan is not the same as a hardship distribution. Default or a loan offset can create tax consequences, and the possible rollover treatment depends on the kind of event. Consult the IRS retirement-plan loan guidance before borrowing.

A hardship distribution requires plan authorization and qualifying circumstances; hardship does not automatically make the distribution tax-free or remove an additional early-distribution tax. Roth balances also do not mean every withdrawal is tax-free. Before requesting funds, obtain the account-type breakdown and ask the administrator and tax adviser which distribution rules and exceptions apply. Avoid using IRA-specific exceptions as though they automatically apply to a 401(k).

Compare job-change and rollover options

After leaving an employer, possible choices can include leaving eligible funds in the old plan, rolling them to an accepting new employer plan or IRA, or taking a distribution. Availability depends on the plan and account balance. Compare fees, investments, creditor protections, withdrawal provisions and any outstanding loan before deciding. The IRS job-separation guidance outlines the starting options.

A direct rollover of eligible funds avoids having the distribution paid to you. An eligible distribution paid to you generally has a 60-day rollover deadline and may involve withholding; replacing withheld funds may be necessary to roll over the gross amount. Some distributions cannot be rolled over. Use the IRS rollover rules and the administrator's notice, particularly when converting pretax money to Roth, which can create taxable income.

Prepare a practical retirement-plan review

1. Obtain the plan description, match formula, vesting schedule, fee disclosure and current contribution totals.
2. Confirm year-end age, catch-up eligibility, applicable Roth treatment and any contributions made through another employer.
3. Ask the administrator to review payroll elections and possible excess contributions before making corrections.
4. For a loan, distribution or rollover, obtain written options and coordinate the tax consequences before authorizing payment.

Hypothetical example: an employee changes employers midyear and elects the maximum deferral at both jobs. The annual individual limit does not restart. Sharing year-to-date totals with the new payroll team can help avoid an excess, but the employee still needs to monitor the combined result.

Primary Care Insurance Solutions (PCI Solutions) can help frame a broader group health benefits planning discussion; the retirement-plan administrator and tax adviser should resolve plan-specific retirement and tax questions. Coordinate the overall budget with the year-end health benefits tax checklist and distinguish retirement deferrals from the medical benefit elections described in the Section 125 plan guide.