How to read the retirement COLA when the IRS posts it

Today is November 9, 2025. The Internal Revenue Service has not, as of this briefing, posted the retirement-plan cost-of-living adjustments for the coming year. In recent cycles that notice has arrived in late October or the first half of November. It is reasonable to expect it any day. It is not reasonable to design, defer, or deduct as if a number you heard secondhand were already the notice. Until the release is on IRS.gov, the baseline is 2025. This piece is about how to read the release when it appears, using the limits you already have, so the morning it posts you do not grab the wrong row.

Sterling Pension Group is a third-party administrator. We are not an actuarial firm. An independent Enrolled Actuary certifies contributions and Schedule SB. A COLA notice is not a valuation, and this briefing is not tax, legal, or actuarial advice. We will not guess the unpublished figures here. Guessing is the mistake the notice is about to punish.

Start from the release you can already open

The model for the document you are waiting for is the one that set the current year. IR-2024-285 is the news release that announced the 2025 retirement limits. It is short on purpose. It leads with the elective deferral and the IRA limit, because those are the figures payroll companies and individual taxpayers ask for first. The technical notice behind a release like that is a set of tables organized by Code section. The standing IRS page that collects the tables, year by year, is the COLA increases page. When the new release lands, open that page and the news release together. If they disagree, you are looking at a cached article or a summary, not at the notice.

Read the effective date before you read the dollars. These adjustments almost always take effect on January 1 of the following calendar year for calendar-year plans. They do not take effect on the morning of the press release. A deferral withheld from a November or December paycheck is still a 2025 deferral, under the 2025 limit, even if the news is already public. A contribution you deposit in January for the 2025 plan year is still a 2025 contribution. The notice changes the next plan year. It does not reopen this one.

The 2025 baseline, so you have it in one place while you wait, is the set of figures that release already locked in. The elective deferral limit is $23,500. The catch-up contribution for a participant age 50 or older is $7,500. A participant age 60, 61, 62, or 63 uses a higher catch-up of $11,250 rather than the ordinary catch-up. The defined contribution annual-additions limit is $70,000. Catch-up contributions do not count against that annual-additions limit. The compensation cap under the provision that limits pay a qualified plan may count is $350,000. The defined benefit dollar limit is $280,000. The IRA contribution limit is $7,000. Write those down as the comparison column. The new notice will either move a row or leave it where it is. Both outcomes are normal.

Which rows matter for a cash balance owner

You are not reading the notice as a large-plan sponsor with a dozen limits to update in a summary plan description. You are reading it as a self-employed owner who may have a 401(k), may be considering a cash balance plan, and needs to know which rows change a design and which rows are noise.

The elective deferral row is the payroll row. It caps what can be withheld as a pre-tax or Roth deferral during the calendar year, before catch-up. If that row moves, your first payroll of the new year is the operational test. If it does not move, do not let a headline about "retirement limits increasing" talk you into withholding more than the old number. The catch-up row is separate. There are now two catch-up figures in the baseline: the ordinary $7,500, and the age 60 through 63 figure of $11,250. When the notice arrives, read those as two rows, not one. A change in the ordinary catch-up does not tell you the higher age-based catch-up moved. The statute ties that higher amount to a percentage of the ordinary catch-up, and the rounding rules can leave it flat in a year when other figures rise. Compare it to $11,250. Do not infer it.

The defined contribution annual-additions row is the $70,000 row in the baseline. It caps employer money plus employee deferrals, other than catch-up, allocated to a participant in a defined contribution plan. It is the practical ceiling of a 401(k) profit-sharing plan. It is not the ceiling of a defined benefit plan. Owners add this row to a pension illustration and call the total a limit. The notice will not do that addition for you, and you should not do it either. If both plans exist, the deductible maximum is an actuarial result under the deduction rules, including the combined-plan rules when they apply. A COLA table does not compute it.

The compensation cap, $350,000 in the baseline, is the pay the plan may take into account. It is not your required salary, and it is not a promise that a contribution will be computed as if you earned it. If you earn less, the plan uses what you earn, subject to the right definition: W-2 wages for a corporate shareholder, earned income for a partner or sole proprietor. If the cap rises in the new notice, the rise matters only for compensation paid in the year the new cap is in force, and only if you actually earn it. It does not rewrite 2025 pay credits already earned under $350,000.

The defined benefit dollar limit, $280,000 in the baseline, is the row cash balance owners come to the notice to find, and the row they most often misread. The IRS describes it on the defined benefit plan benefit limits page. It is the maximum annual benefit payable as a life annuity at retirement age, further limited by compensation and by reductions for early payment and for fewer than ten years of participation when those reductions apply. It is not a maximum contribution. A higher benefit limit, if the notice contains one, does not mean your deposit increases by the same number of dollars. The contribution is whatever an Enrolled Actuary calculates is needed to fund the benefit the document actually provides, inside the deductible maximum. Age does more work in that calculation than a one-year COLA does. A defined benefit plan and a cash balance plan live on this row. A 401(k) does not.

The IRA row is in the same press release because the IRS announces it at the same time. It is your personal limit, currently $7,000, for an IRA that is not the employer's plan. Do not let it migrate into the plan design. Do not let a change in the IRA limit, if there is one, be described as a change in the pension.

Rows you should notice even if you did not come for them

The notice will contain more than the headline. The highly compensated employee threshold is one. It decides who is in the group the nondiscrimination tests worry about. It is not the same test as the compensation cap, and it is not the same test as any wage threshold you may have heard about for Roth catch-up contributions. Those are three different dollars, used for three different jobs. If a summary says "the high-earner number," ask which one.

The key-employee officer threshold matters for top-heavy testing. A small plan sponsored by an owner is often top-heavy. The threshold is easy to skip because it does not change your personal deposit in an obvious way. It can change whether a key employee is a key employee. Read it. Do not memorize it from a newsletter that rounded it.

Social Security figures sometimes travel in the same news cycle and sometimes do not. The taxable wage base is an item the IRS table often shows, and it is still not a pension limit. It affects FICA taxes and, later, the wage test for the Roth catch-up rule. It is not the cash balance pay credit. When you see a wage-base number, leave it in the wage-base row.

Rounding is why a year can feel uneven. The statute does not move every limit by the same percentage. Some limits increase only when inflation crosses a step, so a row can sit still while the deferral limit moves, or the other way around. A flat row is not a clerical error. It is not a reason to email the CPA that the IRS "must have forgotten" the pension. Compare each row to the 2025 baseline and record the delta, including a delta of zero.

What not to do on the morning it posts

Do not change a 2025 payroll deferral because the new table is larger. The new table is not the 2025 table. Do not ask the actuary to rerun a 2025 valuation on the unpublished-until-this-morning figures. The 2025 benefit limit remains $280,000. The 2025 compensation cap remains $350,000. The 2025 defined contribution limit remains $70,000. A valuation dated for the 2025 year uses those limits even if you read the new notice before lunch.

Do not treat the news release as permission to adopt a plan you have not designed. The release does not extend the year, and it does not make elective deferrals retroactive. If a 401(k) deferral for 2025 was not elected before the compensation was paid, the COLA will not cure that. Employer contributions have more calendar left, often through the filing deadline including extensions, but only for a plan that is actually in place and only inside a certified deductible maximum. Publication 560 remains the small-business overview. It will be updated on its own schedule. Do not wait for a revised booklet to find out what the notice said. The notice is the source.

Do not confuse the COLA with the annual return. Form 5500 for a calendar-year plan is generally due July 31, with an extension to October 15. The IRS Form 5500 corner and the Department of Labor's filing page describe that obligation. A limits notice does not file the return and does not fund the minimum. The minimum funding date for a calendar-year defined benefit plan remains September 15 of the following year. Put the new limits, when they exist, on the limits page of your own notes, in a column marked with the year they take effect. Leave the funding date on the deadline calendar, where it already belongs.

Roth catch-up contributions are a related but separate story, and this briefing will not pretend the COLA is that story. The mandatory Roth treatment of catch-up contributions for certain higher-wage participants was delayed through 2025. It is not how you withhold a November deferral. When you read the new notice, you may see wage thresholds and catch-up rows near each other. Proximity is not identity. The cash balance pay credit is employer money. It is not a catch-up, and a change in how catch-ups are taxed will not rewrite it. If a provider bulletin mixes those topics in one headline, split them before you forward the bulletin to your CPA.

PBGC coverage will not be answered by the COLA either. Premiums, if your plan owes them, can be adjusted by other PBGC notices. Coverage itself is plan-specific: substantial-owner plans and certain small professional-service employers sit in different exceptions, and a plan can fail both. The PBGC coverage page is the reference. A higher or lower benefit limit does not flip a plan into or out of coverage.

How we will use the notice, and how we will not

When the release is posted, the useful work is mechanical. Update the deferral and catch-up figures the 401(k) provider will apply on January 1. Update the compensation cap and the benefit limit the next valuation will use for the next plan year. Tell the CPA which year each figure belongs to, so a 2025 deduction file is not quietly rebuilt on the new table. Leave every illustrative contribution labeled illustrative. A COLA does not convert an illustration into a certified deposit. If you want a new illustration under the new limits, it has to be run from your age, your compensation, and your census, after the notice is real. The calculator on this site is a conversation tool. It is not that valuation, and it is not a place to type a rumor while the IRS page is unchanged.

Expect the email traffic to be confident and early. Recordkeepers will send summaries. Some summaries will be right. Some will round a row, merge the two catch-up figures, or describe the benefit limit as a contribution. Check them against the IRS table before you change a payroll file or a plan formula. The defined benefit structure you are considering does not need a same-day amendment because a table moved. It needs a calm reading, and then a design that uses the year the table actually governs.

If the notice has not appeared by the time you read this, do nothing to the 2025 numbers. They are current. They are enough to keep designing a 2025 plan, to keep withholding 2025 deferrals, and to keep a CPA file honest. The absence of next year's table is not a gap in this year's plan.

What to do in the next two weeks

Bookmark the COLA increases page and the 2025 news release, and check the COLA page rather than a reseller's blog. When a release is posted, write down seven comparisons against the baseline in this briefing: deferrals, ordinary catch-up, the age 60 through 63 catch-up, annual additions, the compensation cap, the defined benefit dollar limit, and the IRA limit. Note the effective date in the same handwriting. Send that sheet to your CPA and your 401(k) provider. Do not send them a screenshot of an unrelated headline.

Leave 2025 payroll and any 2025 pension deposit on the 2025 limits until an Enrolled Actuary and the CPA say a particular dollar belongs to the next year. If you have been waiting for the notice before starting a design conversation, you do not need to wait. The notice will not design the census. Bring the current limits and the census and treat next year's table, whenever it posts, as next year's table. Two weeks from today is November 23. If the release has arrived by then, that is the briefing that should quote it. This one will not invent it.