2025 Defined Benefit Plan Limit
For 2025, the Defined Benefit Plan Limit is $280,000 (Annual benefit under a defined benefit plan) and $70,000 (Defined contribution plan limit).
Effective 2025-01-01Source: Notice 2024-80 (IRS)Verified 2026-08-29
Compared with 2024
| Item | 2024 | 2025 | Change |
|---|---|---|---|
| Annual benefit under a defined benefit plan | $275,000 | $280,000 | +$5,000 (+1.8%) |
| Defined contribution plan limit | $69,000 | $70,000 | +$1,000 (+1.4%) |
Who it applies to
Sponsors and participants of defined benefit plans and defined contribution plans subject to IRC Section 415.
What changed this year, and why
For 2025, the IRS adjusted retirement plan limits under Section 415 of the Internal Revenue Code for cost-of-living increases, as published in Notice 2024-80.
Common questions
- What is the 2025 annual benefit limit for a defined benefit plan?
- The limitation on the annual benefit under a defined benefit plan is $280,000 for 2025, effective January 1, 2025, increased from the prior year's limit.
- What is the 2025 defined contribution plan limit?
- The limitation for defined contribution plans is $70,000 for 2025, increased from the prior year's limit.
Every amount on this page is a published figure rather than yours. The Plan limit headroom takes the number you enter and works it out against them, showing which published figure it used.
The benefit limit is the lesser of a dollar cap and your average pay
For 2025, a participant in a defined benefit plan cannot receive an annual benefit that exceeds the lesser of two amounts: 100% of the participant's average compensation for their highest 3 consecutive calendar years, or $280,000. This means the actual limit depends on your pay history. If your average compensation over your best 3-year period is less than $280,000, then that lower figure becomes your cap. The $280,000 limit is scheduled to increase to $290,000 for 2026. The rule ensures that defined benefit plan payouts are tied to actual earnings and prevents disproportionately large benefits for highly compensated participants.
Defined benefit plan. For 2025, the annual benefit for a participant under a defined benefit plan can't exceed the lesser of the following amounts. 1. 100% of the participant's average compensation for their highest 3 consecutive calendar years. 2. $280,000 for 2025 ($290,000 for 2026).
Publication 560 (2025), Retirement Plans for Small Business (IRS)
What makes a plan a defined benefit plan
A defined benefit plan is defined by what it is not: any plan that is not a defined contribution plan falls into this category. Instead of specifying a fixed contribution amount each year, a defined benefit plan promises a specific benefit to participants at retirement. The employer's annual contribution is then determined by calculating what amount must be set aside, based on actuarial assumptions, to fund those promised benefits. Because the contribution depends on factors such as participant ages, expected retirement dates, mortality tables, and interest rates, the plan requires ongoing actuarial valuation. This is why defined benefit plans typically need continuing professional assistance to maintain. The promised benefit may be expressed as a fixed dollar amount or as a formula based on compensation and years of service, but regardless of the formula used, the plan must satisfy the annual benefit limit and other qualification rules that apply to tax-favored retirement arrangements.
A defined benefit plan is any plan that isn't a defined con- tribution plan.
Publication 560 (2025), Retirement Plans for Small Business (IRS)
The compensation an employer may take into account
When calculating contributions and benefits under a qualified retirement plan, an employer cannot take into account compensation above a certain ceiling for each employee. For 2025, the maximum compensation that may be considered is $350,000 per employee. This means that even if an employee earns more than $350,000, the employer uses only $350,000 when applying percentage-based contribution formulas or benefit accrual rates. The compensation limit is adjusted annually for inflation; for 2026, it increases to $360,000. This cap affects both defined benefit and defined contribution plans, ensuring that tax-favored retirement savings are calculated on a reasonable measure of pay rather than allowing disproportionately large contributions for the highest earners. The limit applies separately to each participant in the plan, so a plan with multiple employees applies the $350,000 ceiling individually to each person's compensation when determining allowable contributions or benefits.
The maximum compensation that can be taken into account for each employee in 2025 is $350,000 ($360,000 in 2026).
Publication 560 (2025), Retirement Plans for Small Business (IRS)
The separate limit on a defined contribution plan
A defined contribution plan is subject to its own separate annual limit on the total additions to each participant's account. For 2025, the sum of employer contributions, employee contributions, and forfeitures allocated to a participant's account (excluding earnings) cannot exceed the lesser of 100% of the participant's compensation or $70,000. Because the plan uses whichever of the 2 figures is smaller, a participant earning less than $70,000 will have additions limited to their actual pay rather than the dollar cap. The dollar limit is adjusted periodically for cost-of-living increases; for 2026 it rises to $72,000. Catch-up contributions made by participants who are age 50 or older are not counted toward this ceiling. This limit is distinct from the defined benefit plan limit and applies independently, so an employer maintaining both types of plans must satisfy each set of rules separately for its participants.
1. 100% of the participant's compensation. 2. $70,000 for 2025 ($72,000 for 2026).
Publication 560 (2025), Retirement Plans for Small Business (IRS)
Why the deduction has to be figured by an actuary
Unlike a defined contribution plan where the employer simply contributes a set amount each year, a defined benefit plan promises a specific future benefit to participants. Determining how much the employer must contribute today to fund that future benefit requires complex calculations involving mortality tables, interest rate assumptions, expected salary increases, and the timing of benefit payments. Because these actuarial assumptions and computations directly affect the tax deduction the employer may claim for plan contributions, the IRS requires that a qualified actuary figure the deduction limit. The employer cannot calculate this amount using simple formulas or spreadsheets alone. The actuary certifies that the contributions are sufficient to meet the plan's benefit obligations and that the deduction claimed does not exceed the amount needed to fund the benefits within the legal limits, including the $280,000 annual benefit cap. This professional requirement ensures that defined benefit plan deductions are based on sound actuarial principles rather than employer estimates.
Defined benefit plans. The deduction for contributions to a defined benefit plan is based on actuarial assump- tions and computations. Consequently, an actuary must figure your deduction limit.
Publication 560 (2025), Retirement Plans for Small Business (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Notice 2024-80 (IRS)
- Annual benefit under a defined benefit plan
Effective January 1, 2025, the limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) of the Code is increased from $275,000 to $280,000.
- Defined contribution plan limit
The limitation for defined contribution plans under section 415(c)(1)(A) is increased in 2025 from $69,000 to $70,000.