Important Updates for University Retirement Plans in 2026
The new year brings a series of meaningful updates to university retirement plans, particularly for employees participating in 403(b) and 457(b) plans. Many of these changes stem from the SECURE 2.0 Act, which is designed to modernize retirement savings rules, expand access, and encourage long‑term accumulation, especially for individuals nearing retirement.
Here’s a concise breakdown of several major updates you should be aware of, including contribution limits, Roth requirements, and special planning opportunities.
403(b) and 457(b): A Quick Review
University employees commonly have access to two supplemental retirement plans, including a 403(b) plan and a 457(b) deferred compensation plan.
A 403(b) plan is a tax-advantaged defined contribution plan for employees of public schools, universities, hospitals, and nonprofits. Investment options typically include mutual funds and annuity contracts.
Another option is a 457(b) deferred compensation plan, which is offered to many public university employees and some nonprofit workers. The plan allows deferral of a separate set of contributions in addition to 403(b) limits. It may also offer penalty-free withdrawals upon separation from service at any age (though income tax still applies for pre-tax balances). Contributing to both plans can potentially increase total retirement savings.
2026 Contribution Limits
- Employee elective deferrals for 403(b) and 457(b): Employees can now defer up to $24,500 to these plans. This is up from the $23,500 limit in 2025.
- Age 50 and older catch‑up contributions: Those age 50 and above can contribute an additional $8,000, an increase from the $7,500 limit in 2025.
Because 403(b) and 457(b) plans have separate contribution limits, employees who use both accounts can potentially increase their tax‑advantaged savings each year. Not all 457(b) plans allow additional contribution amounts. Be sure to confirm with your plan sponsor or benefits team.
New Roth Rule for High Earners
A major change under the SECURE 2.0 Act became effective in 2026:
If you earned more than $150,000 in FICA wages (indexed for inflation) in the prior calendar year, all catch‑up contributions must be made as Roth.
What this means:
- Pre‑tax catch‑up contributions are no longer available for high earners.
- Roth catch‑ups offer tax‑free growth and withdrawals in retirement (subject to Roth rules).
- Earners below the threshold may still choose pre‑tax or Roth for catch‑ups.
Reminder: The Roth Option Is Available to Everyone
Regardless of income, all employees may choose Roth for their regular 403(b) and 457(b) contributions if available in the plan. Only catch‑up contributions have the income‑based mandate.
Super Catch‑Up for Ages 60 to 63
Starting in 2025, SECURE 2.0 created an enhanced “super catch‑up” available to individuals age 60 to 63. The increased super catch‑up limit is $11,250 in 2026 and is adjusted for inflation going forward.
This super catch-up can increase contributions during the final years of peak earnings. Note that for high‑income earners, these super catch‑ups must also be Roth under the 2026 rule.
Mega Backdoor Roth Opportunities
While not part of university plans directly, many employees with outside self‑employment income or who participate in 403(b) plans with after‑tax contribution features may be eligible to execute a mega backdoor Roth strategy.
This involves making after‑tax, non‑Roth contributions beyond the regular IRS employee limits and converting those contributions into Roth account (either in‑plan or via Roth IRA).
Whether a university’s plan allows after‑tax contributions varies by institution; employees must confirm with human resources or the plan administrator.
SEP IRA for Consulting Income
Many university professionals, especially physicians, researchers, and lecturers, earn 1099 consulting income outside their W‑2 university employment. A SEP IRA can be an effective retirement savings tool for that income. This account allows employer contributions up to 25% of net self‑employment earnings (subject to IRS limits). Contributions are pre‑tax and tax‑deferred and the account is easy to set up and low‑maintenance. Funds in a SEP IRA do not affect 403(b) or 457(b) contribution limits from university employment, which can potentially maximize total tax‑advantaged savings.
Putting It All Together
The retirement landscape for university employees continues to evolve, with 2026 bringing substantial changes that impact high‑earners and those nearing retirement. Key planning priorities include:
- Evaluating Roth vs. pre‑tax contributions, including mandatory Roth catch‑ups for certain earners.
- Taking advantage of the enhanced age 60 to 63 super catch‑up contributions.
- Considering a mega backdoor Roth if your plan structure allows it.
- Using a SEP IRA to shelter outside consulting income.
- Coordinating 403(b), 457(b), Roth, and SEP strategies to optimize tax efficiency.
These 2026 updates give university employees new options to consider to help strengthen their retirement strategy.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Scott L. Kornstedt
Financial Advisor
CFP®, CLU®, ChFC®, MBA