IRC 415(b) limits the benefit a defined benefit plan may pay, expressed as a yearly income for life starting between 62 and 65. For 2026 it is the lesser of $290,000 and 100% of your high-3 average compensation. A cash balance plan is limited the same way, which is why its contributions are measured against a future payout rather than a yearly cap.
Three adjustments apply:
- Phase-in. The dollar limit is multiplied by your years of participation in the plan over ten, so each year adds at most $29,000 of yearly benefit. The pay limit phases in the same way by years of service with the business, and service before the plan started counts.
- Age. Before 62 the dollar limit is reduced actuarially, and after 65 it is increased.
- Lump sum. To test a lump sum, the yearly limit is converted using an interest rate of at least 5.5% and the IRS mortality table. At 62 with ten years of participation, it comes to millions of dollars.
Every contribution is aimed at that ceiling. The plan funds it over the years left to normal retirement age, so the fewer years remain, the larger each year's contribution. See the limit at every age and how much you can contribute.