Compensation Cap

The maximum compensation the IRS lets a 401(k) consider when calculating contributions, $350,000 for 2026. Earn $500,000 from your S-Corp? Only the first $350,000 counts for the 25% employer share, capping that bucket at $87,500 (which the $70,000 combined ceiling clips back further). The cap rises with inflation each year. It mostly bites high-earning sole consultants and S-Corp owners; below $350k it's invisible. The cap is also why mega-backdoor Roth strategies plateau, once compensation runs out, the rest of the contribution room sits unused.