Direct Answer
The Section 415(b) defined benefit plan annual benefit limit for 2026 is $290,000 per year. Only compensation up to $360,000 can be used in the benefit formula. These limits apply to traditional pensions, government pensions, and cash balance plans.
Defined Benefit Plan Annual Benefit Limits
Defined benefit annual benefit and compensation limits by year (2005-2026)
| Year | Annual Benefit Limit | Compensation Limit |
|---|---|---|
| 2005 | $170,000 | $210,000 |
| 2006 | $175,000 | $220,000 |
| 2007 | $180,000 | $225,000 |
| 2008 | $185,000 | $230,000 |
| 2009 | $195,000 | $245,000 |
| 2010 | $195,000 | $245,000 |
| 2011 | $195,000 | $245,000 |
| 2012 | $200,000 | $250,000 |
| 2013 | $205,000 | $255,000 |
| 2014 | $210,000 | $260,000 |
| 2015 | $210,000 | $265,000 |
| 2016 | $210,000 | $265,000 |
| 2017 | $215,000 | $270,000 |
| 2018 | $220,000 | $275,000 |
| 2019 | $225,000 | $280,000 |
| 2020 | $230,000 | $285,000 |
| 2021 | $230,000 | $290,000 |
| 2022 | $245,000 | $305,000 |
| 2023 | $265,000 | $330,000 |
| 2024 | $275,000 | $345,000 |
| 2025 | $280,000 | $350,000 |
| 2026 | $290,000 | $360,000 |
Source: IRS: COLA Increases for Dollar Limitations on Benefits and Contributions. Last verified: September 2026. Verify current-year figures at IRS.gov before making decisions.
How the benefit limit works
The $290,000 (2026) annual benefit limit applies to the pension annuity payment. For a lump-sum cash balance plan, the benefit is converted to its annuity equivalent before testing. The limit is reduced for early retirement and increased for late retirement. Benefits accrued before the effective date of an amendment are generally not retroactively reduced.
Frequently asked questions
What is the defined benefit plan annual benefit limit?
The annual benefit limit under IRC Section 415(b) caps the pension benefit a defined benefit plan can pay each year. For 2026, no participant may receive more than $290,000 per year from a single plan, regardless of years of service or salary. This limit applies to the annuity form of payment and is adjusted for earlier retirement.
How does the compensation cap affect defined benefit pensions?
Defined benefit formulas use average compensation to calculate the benefit. Only compensation up to the annual limit ($360,000 in 2026) counts in the formula. A participant earning $500,000 has only $360,000 recognized for benefit calculation purposes, limiting the pension benefit that can accrue each year.
What is a cash balance plan and how does it relate to this limit?
A cash balance plan is a type of defined benefit plan that expresses the benefit as a hypothetical account balance rather than a monthly payment. The Section 415(b) annual benefit limit still applies at distribution, converted from the lump sum back to an equivalent annuity. Cash balance plans are popular with law firms and self-employed professionals because they can allow very large tax-deductible contributions.
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Swoopr Editorial Team. (2026). Defined Benefit Plan Annual Benefit Limits. Swoopr Investment. https://www.getswoopr.com/tables/retirement/defined-benefit-limits/
Check the figures against the primary sources listed under References before you rely on or republish them; the series they come from are revised.