IRS contribution & Benefit limits

Every year, the IRS adjusts the limits that apply to retirement plans. These limits control how much money can go into or come out of a plan and depend on the type of plan you have — a defined contribution or a defined benefit plan. 

Defined Contribution Plans — such as 401(k), profit sharing, and money purchase plans — are limited by the total amount that can be contributed to an individual’s account each year. This includes both employer and employee contributions. For 2025, the total annual addition limit under IRC §415(c) is $70,000 (or $77,500 for participants age 50 and older who make catch-up contributions).

Defined Benefit Plans — such as traditional pension or cash balance plans — are instead limited by the maximum annual benefit payable at normal retirement age, as defined under IRC §415(b). For 2025, the maximum annual benefit is $280,000, typically expressed as a life annuity beginning at age 62–65.

In short, defined contribution limits cap the amount that goes into the plan, while defined benefit limits cap the amount that comes out of the plan in the form of a retirement benefit. Both limits are indexed periodically for inflation and are a key consideration when designing and administering qualified retirement plans.