You maxed the 2026 401(k). The pension is a different limit.

It is January 18, 2026, and some owners have already maxed the 2026 401(k). They took compensation early, or they set a high deferral percentage on the first payrolls, or both. The payroll system stopped the deferral at the limit, or it should have. The question that arrives the same afternoon is some version of "where does the rest go?" The rest does not go into a larger 401(k). The defined contribution layer has a ceiling. The pension, if it fits the practice, is a different ceiling, written as a benefit rather than as a deposit, and it is not a flat number you can read off the same table that stopped your deferral.

Sterling Pension Group is a third-party administrator and pension consultant. We are not an actuarial firm. An independent Enrolled Actuary certifies what a defined benefit plan may take as a minimum and what the employer may deduct. This briefing is not tax, legal, or actuarial advice. It is a map of the layer you have finished and the layer you have not started, so the two are not added together and called a quote.

What you actually maxed

Be precise about which limit stopped you, because the next step depends on it. The elective deferral limit for 2026 is $24,500. That is employee money, withheld from pay, pre-tax or Roth according to the election and, for catch-up dollars, according to the Roth rule. If you are 50 or older and not in the special age band, the ordinary catch-up is another $8,000. If you are 60, 61, 62, or 63, the catch-up is $11,250 instead. Catch-up does not count against the annual-additions limit. A participant who has deferred $24,500 and has not yet made a catch-up they are eligible for has not finished the employee side. A participant who has also made the catch-up has finished the employee side. Neither of those facts tells you whether employer profit sharing has used the rest of the defined contribution room.

The annual-additions limit for 2026 is $72,000. It counts elective deferrals other than catch-up, plus employer contributions, plus forfeitures allocated, plus after-tax employee contributions if the plan allows them. An owner who deferred $24,500 still has room, on that arithmetic, for $47,500 of employer money inside the $72,000, and then catch-up on top if eligible. An owner who is told "you maxed" may have maxed only the deferral. The employer slice may still be available, and in a plan with staff it may not be yours to take without a formula that also covers employees. Do not wire an employer contribution because a deferral cap was reached. The formula wires it, or it does not.

Those figures are in IR-2025-111 and Notice 2025-67, effective January 1, 2026. The comparison table lives on the IRS COLA page. The 2025 limits are not what stopped a 2026 payroll. If a report is still showing $23,500 and $70,000, the report is on the prior year. Fix the report before you design anything on top of it.

If your 2025 FICA wages from the sponsoring employer were over $150,000, the catch-up portion of what you just did — the $8,000 or the $11,250 — had to be Roth. The $24,500 did not, unless you elected Roth for the regular deferral. Confirm the character on the pay stub. A pre-tax catch-up that should have been Roth is a defect. It is not a clever way to preserve a deduction. Partners and sole proprietors without FICA wages from the sponsor are often outside that rule. Being outside it does not raise the $24,500 or the $72,000.

The pension limit is a benefit, and age does the work

A cash balance plan is a defined benefit plan with a hypothetical account. The statutory dollar limit for 2026 is $290,000. The IRS describes that limit on the defined benefit benefit-limits page. It is the maximum annual benefit, generally payable as a life annuity at retirement age. It is coordinated with a compensation limit of 100 percent of average high compensation. It is reduced when benefits start earlier than the law's retirement age, and the dollar limit is phased in when years of participation are fewer than ten. A brand-new plan does not deliver the full $290,000 annuity in year one. Anyone who quotes the full limit as this year's deposit is skipping the phase-in and skipping the difference between a benefit and a contribution.

There is no IRS row that says the maximum cash balance contribution is a single dollar amount for every owner. The actuary translates a benefit into a deposit using the document's formula, the interest crediting rate, your compensation, your age, and the funding and deduction rules. Compensation the plan may count is capped at $360,000 for 2026. If you earn less, the formula uses less. Two owners who both maxed a 401(k) and both earn the cap can have very different pension deposits because one is 50 and the other is 60. The older owner is funding a similar life annuity over fewer years. The annual credit is larger. That is the entire reason age shows up in every serious illustration, and it is why a flat "pension cap" borrowed from a podcast is not a plan.

A cash balance plan is the version of that promise written as a hypothetical balance with pay credits and interest credits. The balance is hypothetical because the trust's market value can differ from the sum of the credits. The employer is responsible for the difference. You do not "max" it the way you maxed a deferral, by checking a box in payroll. You adopt a formula the business can fund in a bad year as well as a good one, and an Enrolled Actuary tells you the range.

Any dollar figure you have seen for "people around your age" is illustrative. It was built on assumptions that are not your census. It is not a deductible maximum. It should not enter an estimated-tax payment. The illustrations on this site, if you use them, are conversation pieces under that label. The calculator is the same kind of tool. Neither one certifies a contribution. If a salesperson removes the label and calls the result what you can put away, put the label back before you forward the email to your CPA.

Why the two limits do not simply add

Owners add $72,000 to a pension illustration, then add $8,000 or $11,250 of catch-up, and ask the CPA to confirm the total. The CPA should not confirm it. The defined contribution limit and the defined benefit limit are separate statutory ceilings. Using both is possible. It is the point of a combo. Using both at the arithmetic sum, in the same year, for the same employees, is constrained by the deduction rules. When an employer maintains a defined benefit plan and a defined contribution plan that cover the same people, a combined deduction limit can apply. Elective deferrals are not counted the way employer profit-sharing contributions are counted. A modest employer contribution to the 401(k), often discussed in the neighborhood of a small percentage of pay, can sit beside a much larger pension deduction in designs the actuary has actually run. A profit-sharing contribution that tries to use every dollar of the $72,000 on top of a maximum pension credit can fail the deduction limit even though each plan, looked at alone, would have accepted the deposit.

PBGC coverage can change that combined-plan analysis. Coverage is plan-specific. Some owner-only plans and some small professional-service employers are exempt. A plan that is not exempt is a different deduction conversation, and it is also a premium conversation. The Pension Benefit Guaranty Corporation's coverage guidance is the public map. It is not a determination. Do not assume you are exempt because the practice feels small, and do not assume you are covered because you are cautious. Ask.

Staff change the arithmetic again. A formula that gives the owner a large credit may have to give employees a gateway or a minimum benefit for the arrangement to pass nondiscrimination. That staff cost is part of the employer's outlay. It is not optional once the document says it is owed. If the reason you maxed the 401(k) so quickly is that the practice is just you, say so with a census, not with an impression. If an associate will be hired this spring, say that too. A design that works in January and fails when eligibility opens in July was not a fit. The notes on when it is not a fit are worth reading before you fall in love with a combined total. So is the plain comparison of a SEP, a 401(k), and a pension on the compare page. A SEP is not a quieter way to exceed $72,000. Adding one beside a pension you also intend to adopt usually makes the coordination worse, not better.

The deduction belongs to the employer. An S corporation deducts an employer contribution on the corporate return, and the shareholder's personal return picks it up through the K-1 rather than as a second personal write-off. A partnership deducts it at partnership level. A sole proprietor deducts it on the owner's return because there is no separate employer return, and the contribution interacts with earned income. The CPA needs the entity. The actuary needs compensation defined the way that entity defines it. W-2 wages are not distributions. Draws are not earned income until the calculation says they are. Publication 560 is the IRS booklet that uses those words in their public meaning. Bring it to the meeting so the vocabulary matches.

What "the rest" should not do

The rest of this year's profit should not be forced through payroll as an extra deferral. The deferral limit is statutory. Excess deferrals have a correction process and a tax cost. They are not a planning tool. The rest should not be deposited to the cash balance trust before a plan exists, into an account that is still titled as the owner's brokerage account. A personal account is not a pension trust. The rest should not be parked in an IRA beyond the IRA limit of $7,500, plus $1,100 if you are old enough for the IRA catch-up, and then described as the pension. An IRA is not a defined benefit plan. It does not accept the practice's large employer contribution. It is a personal account with a personal limit, announced in the same news release and unrelated to the $290,000 benefit limit.

If a plan already exists and you have maxed only the deferral, the "rest" inside the 401(k) may be an employer contribution the formula already provides. Read the adoption agreement before you assume the rest is a pension problem. Profit sharing can be discretionary in amount, within a cap the document states, and it is often deposited after the year with the deduction deadline in mind. That flexibility is not the same as cash balance flexibility. A defined benefit formula accrues. Changing it after the accrual requires an amendment that respects anti-cutback rules and, when future accruals are reduced significantly, advance notice. The plan lifecycle after adoption is mostly this distinction, repeated annually: what the formula already promised, and what a timely amendment can still change.

Fees are part of deciding whether the second layer is worth it. Actuarial certification, administration, Form 5500 work, and possible PBGC premiums are real costs against a real deduction. They are justified when the certified contribution is large enough, and durable enough, to matter. They are not justified by the annoyance of having hit $24,500 in January. The split of who invoices for what is on the fees page. The actuary's invoice and the administrator's invoice are not the contribution.

What to do in the next two weeks

Write down which limit you hit: the $24,500 deferral, the catch-up, the $72,000 annual additions, or some combination. Attach the payroll register that shows the deferrals and their tax character. Attach compensation year to date and what you expect to pay yourself for the rest of 2026. Attach a census, including anyone you expect to hire. Attach the 401(k) adoption agreement so nobody designs a second plan that fights the first one.

Ask for an illustrative pension range at your actual age, on the $290,000 benefit limit and the $360,000 compensation cap, with the phase-in acknowledged if the plan would be new. Do not ask anyone to confirm a flat cap. Then bring that file to a design conversation. Two weeks from today is February 1. The useful comparison by then is not another 401(k) article. It is what age does to the pension credit, under assumptions that stay labeled as assumptions until an Enrolled Actuary replaces them.