The IRS has announced higher 401(k) contribution limits for 2026. For business owners, this is much more than a tax update. It is a planning opportunity to revisit your retirement plan design, evaluate service providers, and ensure your company’s 401(k) is competitive in a changing landscape.
Higher limits mean more flexibility for key employees
In 2026, total 401(k) contributions for eligible employees will rise to about $72,000. Participants ages 50 to 59 can contribute up to roughly $80,000 including catch-up contributions. Those ages 60 to 63 may reach about $83,500, depending on plan features. These increases apply to the combined employee and employer contributions.
These higher limits will matter most to high earners, key employees, and owners who can contribute beyond the standard deferral limit. That is why the after-tax contribution plus Roth conversion strategy is gaining attention.
The Mega Roth strategy: attractive but not for everyone
The “Mega Backdoor Roth” allows employees to make after-tax contributions to the 401(k) and then convert those savings into Roth dollars. This can be appealing for high earners who want more tax diversification and long-term tax-free growth.
However, this strategy is complicated and not appropriate for most participants. It requires the right plan design, the right service providers, and the right operational guardrails. Many plans do not offer after-tax contributions or in-plan Roth conversions.
A plan design opportunity during the Cycle 3 restatement period
Business owners are entering a required plan restatement cycle ahead of 2026. This is the perfect time to ask whether your 401(k) plan should offer after-tax contributions or Roth conversion features.
This is also a chance to review whether your plan is built to meet the needs of both the broader employee base and high-earning participants. Much has changed in the retirement plan marketplace since the last restatement period and the rising contribution limits make this review more urgent.
📎 Pro Tip:
If you want a deeper breakdown of why 2026 is such an important year for plan sponsors, you may find my earlier article helpful:
“Cycle 3 401(k) Restatement: A Hidden Opportunity to Upgrade Your Plan”
👉 https://www.carlossalmon.com/blog/cycle-3-401k-restatement-business-owner-opportunity-2026
A chance to evaluate your service providers
Not all TPAs or recordkeepers handle after-tax contribution processing or Roth conversions effectively. Some do it well. Some do not. That is why business owners should use this restatement window to evaluate:
Whether their providers support after-tax contributions
Whether in-plan Roth conversions are available and operationally clean
Whether participant communications explain these features
Whether the provider has the technology and processes to avoid compliance errors
Whether your advisor is actively reviewing plan design and participant outcomes
For many business owners, this becomes the moment where they realize their expectations should be higher. A good advisor helps evaluate the entire 401(k) ecosystem, not just investment menus.
Questions every business owner should ask during this cycle
Does our 401(k) allow after-tax contributions?
Does it allow in-plan Roth conversions?
Are our recordkeeper and TPA aligned operationally?
Does our plan still meet the needs of our workforce?
Are we evaluating each service provider or simply renewing contracts?
Are we offering competitive features for key employees in 2026 and beyond?
The rising 2026 contribution limits offer more than higher savings potential. They give business owners an opportunity to ensure their plan structure is strong, modern, and aligned with their goals.
If you want to review your company’s plan design or evaluate your service providers, I am always happy to help.
Converting from a traditional IRA to a Roth IRA is a taxable event.
A Roth IRA offers tax free withdrawals on taxable contributions.
To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
Cetera Wealth Services, LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.