Shutdown’s End Sets Stage for Retirement Plan Contribution Limits

With seven Democrats and an independent senator aligning with Republican senators to end the lengthy U.S. government shutdown, the push for a reopening became inevitable Wednesday after more than 40 days of impasse.

With that news, plan advisers and sponsors awaited the annual contribution limits for qualified defined contribution plans and individual retirement accounts for 2026, which are announced each year by the Internal Revenue Service. The limits for 2025 and 2024 tax years were announced on November 1 of the preceding year, while the limits for the 2023 tax year were announced in October 2022, meaning the report is already likely later than its intended timeline.

Plan sponsors should be in the process of or have already finalized their annual participant notices for distribution, says Rosie Zaklad, a principal in Groom Law Group, whose practice concerns the administration of retirement plans.

Zaklad says she is hopeful that the limits will be announced as early as this week. The IRS has made several releases during the shutdown, which makes a swift release a possibility, but it is currently uncertain when the limits will be released.

“This seems to be a ‘must-have’ even in a shutdown,” she says. “It is particularly urgent this year with the new mandatory Roth catch-up rule going into effect—we will need to know what the threshold is for determining what employees are impacted by this new rule based on 2025 compensation.”

Release of Economic Data

Meanwhile, the publication of key economic data, such as the monthly jobs report, and inflation data has been paused during the shutdown. While some independent reports have offered a glimpse, the government reports are considered the gold standard.

According to Martha Gimbel, executive director and co-founder of the Budget Lab at Yale University, who served as White House economic adviser under former President Joe Biden, when the shutdown ends, the release of data will vary based on the report type.

The jobs report for September—which should have been released in early October—should be available quickly after the government reopens, she says, while only half of October’s data will be released. November’s jobs report may face delays, and there likely will not be an inflation reading for October. Agencies usually provide an updated release schedule shortly after reopening, Gimbel says.

White House Press Secretary Karoline Leavitt, however, suggested the shutdown may have a significant impact on the continuity of federal data.

The “October CPI and jobs reports likely [will] never [be] released, and all of that economic data released will be permanently impaired, leaving our policymakers at the Fed[eral Reserve] flying blind at a critical period,” Leavitt said.

Documentation During the Shutdown

In addressing the impact of a government shutdown on employee benefits, employers are also encouraged to document how they managed benefits during the furlough, says Lisa Carrasco, a partner in the executive compensation and employee benefits practice at law firm Smith, Gambrell & Russell LLP. This documentation reflects the employer’s prudent and compliant actions regarding employee benefit plans such as 401(k), medical and disability.

According to Carrasco, for plan sponsors who employ contractor employees—who, unlike federal employees, do not receive back pay—options like 401(k) loans or hardship withdrawals may be necessary, although hardship withdrawals come with strict qualifications and potential taxes. Employers might also consider amending their plans to allow for additional loans or incorporating provisions from the SECURE 2.0 Act of 2022, which enables a penalty-free withdrawal of up to $1,000 for emergency financial needs.

Carrasco says it is crucial for employers to communicate effectively with third-party administrators and prepare return-to-work notices that address key employee concerns, such as the resumption of payroll and benefit contributions, as well as any catch-up payments needed for missed premiums. Employees should be reminded to review and adjust their deferral elections as needed.

“Documenting how the employer handled benefits during the shutdown is still prudent and memorializes what was done,” she says.