Does $145,000 inflation-adjust to $150,000?

Does $145,000 inflation-adjust to $150,000?

For the tax law that a higher-wage participant’s age-based catch-up deferrals must be Roth contributions, the unadjusted § 414(v)(7)(A) amount was $145,000.

For 2024, the first tax year § 414(v)(7) applied (even if not enforced), a participant was § 414(v)(7)-affected if her 2023 wages was more than $145,000.

Despite the IRS’s nonenforcement relief, the IRS published the § 414(v)(7)(A) amount for 2025: “The Roth catch-up wage threshold for 2024, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan . . . for 2025 must be designated Roth contributions, remains $145,000. IRS Notice 2024-80, 2024–47 I.R.B. 1120 (Nov. 18, 2024), https://www.irs.gov/pub/irs-irbs/irb24-47.pdf (emphasis added).

In that 2024 Notice, the IRS said “remains” sixteen times. Four of those uses were for amounts the IRS identified as “not subject to an annual cost-of-living adjustment[.]” I infer the other twelve uses were about measures for which the CPI-U changes were not wide enough to reach a rounding increment. Because the § 414(v)(7)(A) amount was among those twelve, I presume CPI-U changes from 2023Q3 to 2024Q3 were not enough to reach § 414(v)(7)(E)’s $5,000 rounding increment. Yet, with no adjustment and despite the nonenforcement relief, the IRS explained how to apply § 414(v)(7) for 2025, looking to the preceding year’s wages.

To adjust the § 414(v)(7)(A) amount to be used to apply § 414(v)(7) for 2026 deferrals:

The base period is July-August-September 2023. The adjustment period is July-August-September 2025. [For the statute and Treasury regulations, see https://benefitslink.com/boards/topic/80061-is-150000-the-limit-on-2025-fica-wages-before-a-participant-must-make-2026-age-based-catch-up-elective-deferrals-as-roth-contributions/.]

Consumer Price Index for All Urban Consumers (CPI-U)

2023 July-August-September: 305.691 + 307.026 + 307.789

2025 July-August-September: 323.048 + 323.976 + 324.800

Applying those changes, John Feldt’s math (generously given to us) puts the unrounded amount at $153,077, and the to-be-published amount as $150,000. https://benefitslink.com/boards/topic/80106-2026-cola-projection-of-dollar-limits/

An ambiguity (if any) results not from that math, but from interpreting Congress’s text.

The tax statute reads: “[I]n the case of an eligible participant whose wages (as defined in section 3121(a)) for the preceding calendar year from the employer sponsoring the plan exceed $145,000, [I.R.C. § 414(v)](1) shall apply only if any additional elective deferrals are designated Roth contributions (as defined in section 402A(c)(1)) made pursuant to an employee election.”

I read § 414(v)(7)(E)’s (the adjustment provision’s) reference to “the $145,000 amount in subparagraph (A)” as referring to § 414(v)(7)(A)’s reference to “wages . . . for the preceding calendar year[.]”

So, a participant will be § 414(v)(7)-affected for 2026 if her 2025 wages was more than $150,000.

BenefitsLink neighbors, do you read the law the way I read it?

Without waiting for an IRS release (which might be shutdown-delayed), many employers, plan administrators, and service providers want now the estimate—even if one explains it’s not yet official—to communicate with might-be affected participants and to help payroll managers prepare to identify 2026’s affected participants.