Employer cents: Q3/25

THIRD QUARTER | 2025

The IRS has announced the 2026 Cost of Living Adjustments

The IRS recently issued Notice 2025-67 to announce the 2026 dollar limits for retirement saving vehicles like the CalPERS 457 Plan. Here are the key details of the limits for 2026:

	Annual Deferral Limit: Participants aged 49 and under by the end of 2026 can contribute up to $24,500 on a pre-tax and/or Roth after-tax basis.
	Standard Catch-Up Contribution Limit: Participants aged 50-59 and 64+ by the end of 2026 can contribute up to $32,500 ($24,500 + $8,000).
	Super Catch-Up Contribution Limit: Participants aged 60-63 by the end of 2026 can contribute up to $35,750 ($24,500 + $11,250).
	457 Special Election Catch-Up Contribution Limit: Participants in the three years prior to their year of normal retirement age who qualify for this provision may contribute up to $49,000 ($24,500 + $24,500) in 2026.

New in 2026: If a participant’s wages are subject to Social Security tax and they made more than $150,000 in 2025 (Box 3 of the Form W-2), they may only make catch-up contributions on a Roth after-tax basis in 2026. This requirement does not apply to the 457 Special Election Catch-Up provision.

If you receive questions from your participating employees about increasing or updating their CalPERS 457 Plan contributions, please direct them to complete a Participant Change Authorization Form and return it as instructed. For employee questions about their 2026 contribution limit or their age-based catch-up options, please encourage them to schedule an appointment with their dedicated Account Manager by calling 888-713-8244 or visiting calpers457.timetap.com.

Tracking wages for CalPERS 457 Plan participants
who pay into Social Security

IMPORTANT REMINDER: Effective January 1, 2026, participants aged 50 or older with FICA wages (Box 3 of the Form W-2) for 2025 exceeding $150,000 can only make age 50+ catch-up contributions with Roth after-tax money. If your agency pays into Social Security for a participating employee, you must make a reasonable good faith effort throughout 2026 to comply with the Roth Catch-Up requirements. This follows IRS final regulations establishing a transition period to allow employers additional time to meet the provision.

These mandatory provisions from the SECURE 2.0 Act impact all agencies and employees that pay Social Security taxes. The 457 Special Election Catch-Up provision, though, is not impacted by this change.

CalPERS will work with impacted agencies throughout the implementation of this SECURE 2.0 Act change. For help identifying your employees whose wages exceed the FICA threshold, contact CalPERS by email at CalPERS_457_Plan@calpers.ca.gov or call 800-696-3907.

It is vital to let the CalPERS 457 Plan team know when there are changes to your personnel. Let’s work together to ensure that we have updated records of your agency’s points of contact, their roles, and how to reach them by phone and email.

Please report any changes to the CalPERS 457 Plan team as soon as possible by contacting:
calpers_457_plan@calpers.ca.gov

The IRS has announced the 2026 Cost of Living Adjustments

Tracking wages for CalPERS 457 Plan participants who pay into Social Security

Processing CalPERS 457 Plan forms for your employees

Navigating the SECURE 2.0 Act with the CalPERS 457 Plan

Important 2025 year-end payroll reporting reminder

End 2025 with a CalPERS 457 Plan review to help satisfy your fiduciary responsibility and prepare for the new year

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Processing CalPERS 457 Plan forms for your employees

Employees participating in the CalPERS 457 Plan can make several changes to their account by completing paper forms. When your agency receives these forms, some processing may be required on your end before forwarding the forms to Voya. Information from Employee New Enrollment and Participant Change Authorization Forms, for example, must be updated in myCalPERS before the forms are sent to Voya for processing. Updating myCalPERS in a timely manner can help ensure that your employees are saving for retirement as they have directed. To review and discuss updating your records when an enrollment or account change is received, contact CalPERS by email at CalPERS_457_Plan@calpers.ca.gov or call 800-696-3907.

Navigating the SECURE 2.0 Act with the CalPERS 457 Plan

The SECURE 2.0 Act of 2022 created many opportunities for employees to increase their retirement savings and financial security. CalPERS has adopted the mandatory, and some of the optional, provisions through this legislation to expand participant coverage, help participants preserve income and simplify plan rules and administrative procedures as it applies to the CalPERS 457 Plan.

What changed	What it means for you or your employees
Required Minimum Distributions (RMD) The required age for an RMD beginning date was increased for participants and spousal beneficiaries of a participant that died prior to reaching the RMD beginning date. The new RMD ages are: • Employees born in 1951 through 1959: 73¹ • Employees born after 1959: 75	CalPERS 457 Plan participants are notified by mail annually, starting with the first year they are eligible for and required to begin taking minimum distributions.
Roth Plan Distribution Rules Starting with the 2024 RMD, the designated Roth account under a plan is not subject to RMD during the participant’s lifetime.	Participants eligible for a Required Minimum Distribution will only be required to take a distribution from their pre-tax source.
RMD Excise Tax Reduction The Internal Revenue Code previously imposed a 50% excise tax on RMDs that are not taken in a timely manner.	The excise tax on RMDs that are not taken in a timely manner was reduced from 50% to 25%, and to 10% if a correction is made in a timely manner.
Elimination of “first day of the month” requirement for 457(b) Plans Previously, 457(b) plan participants must have made a deferral election in the month prior to the month of compensation being paid or made available.	Participants can now make a CalPERS 457 Plan deferral election in the same month as the compensation is paid, effective with respect to compensation not yet paid or made available.
Qualified Disaster Distributions Permits participants who meet certain criteria to take a distribution due to a federal disaster declaration.	Participants can take a distribution of up to $22,000, aggregated across all their accounts and IRAs. Distributions are not subject to the IRS 10% premature distribution penalty tax² and can be amortized as income over a three-year period. Amounts distributed prior to the disaster to purchase a home can be recontributed.
Roth Catch-Up If a participant’s wages are subject to Social Security tax (Box 3 of the Form W-2; does not apply to Medicare tax Box 5) and were more than $150,000 in 2025 (indexed for inflation in future years), the participant may only make Age 50+ Catch-Up contributions on a Roth after-tax basis in 2026. Prior to 2027, impacted agencies must make a reasonable good faith effort to comply with the Roth Catch-Up requirements.	CalPERS will provide resources to agencies who pay into FICA to help ensure impacted employees are identified and their contributions monitored. Roth Catch-Up does not apply to the 457 Special Election Catch-Up provision. If a participant is eligible for both an Age 50+ Catch-Up and the 457 Special Election Catch-Up in the same tax year and the Age 50+ Catch-Up is the greater catch-up contribution amount, a portion of the Age 50+ contribution may be made as a pre-tax contribution up to the amount of the underutilized amount calculated under the 457 Special Election Catch-Up.
Withdrawal for Emergency Personal Expenses Provides an exception to the IRS 10% premature distribution penalty tax² for certain distributions for emergency expenses, which are unforeseeable or immediate financial needs relating to “personal or family emergency expenses.”	A participant is allowed one distribution per calendar year of up to $1,000. They have the option to repay the distribution within 3 years. No further emergency distributions are permissible during the 3-year repayment period unless direct repayment occurs, or aggregate elective deferrals are contributed to the plan in at least the amount that was distributed and not repaid.
Penalty-free withdrawal for domestic abuse cases Permits participants who self-certify they experienced domestic abuse to obtain a withdrawal (the lesser of $10,300 in 2025 and $10,500 in 2026, indexed for inflation in future years, or 50% of the participant’s account).	The distribution is not subject to the IRS 10% premature distribution penalty tax.² A participant can repay the withdrawn money over 3 years and will be refunded for federal income taxes on money that is repaid.
Increased Catch-up Limits Increases age based catch-up limits to the greater of $10,000 or 50% more than the regular Age 50 Catch-Up amount (as indexed for inflation) for participants who have reached ages 60, 61, 62 and 63 by the end of the year.	Participants aged 60-63 by the end of 2025 can contribute up to $34,750 ($23,500 + $11,250) in 2025. Participants aged 60-63 by the end of 2026 can contribute up to $35,750 ($24,500 + $11,250) in 2026. If a participant is eligible for an age-based catch-up and the 457 Special Election Catch-Up under the CalPERS 457 Plan in the same tax year, IRS rules do not allow them to use both in the same calendar year. IRS rules permit them to use the catch-up that lets them contribute the greater amount. A participant whose wages are subject to Social Security and were more than $150,000 in 2025 (indexed for inflation in future years) is subject to the mandatory Roth Catch-Up requirement.
Qualified Birth and Adoption Distributions (QBAD) A participant who has taken a QBAD may repay that distribution to the CalPERS 457 Plan or an IRA.	Repayments must be repaid within 3 years from the original date of the distribution.
For questions about the SECURE 2.0 provisions adopted by the CalPERS 457 Plan and applying them for your agency, email CalPERS_457_Plan@calpers.ca.gov or call the CalPERS 457 Employer Plan Line at 800-696-3907.

1 Per the IRS Proposed RMD regulations, the RMD age applies to employees born in 1959 pending enactment of SECURE 2.0 technical corrections legislation.

2 Distributions from governmental 457(b) plans are not subject to the IRS 10% premature distribution penalty tax unless the distribution consists of amounts rolled over from a non-457(b) retirement plan (unless an IRS exception applies).

Important 2025 year-end payroll reporting reminder

Please make sure that the contributions your payroll team submits between late December 2025 and early January 2026 are applied for the correct tax year to your participants’ CalPERS 457 Plan accounts.

Here’s how to ensure accuracy and avoid posting delays during the 2025 year-end payroll reporting period:

Work closely with Voya, who handles recordkeeping administration for the CalPERS 457 Plan.
If the pay end date for the last payroll of 2025 is not the same tax year as your pay date (for example, your pay end date for the last payroll of the year is December 31, 2025 but your employees will not receive their checks for this payroll period until after January 1, 2026), it is imperative that you send Voya an email at CalPERS_Plan_Admin@voya.com. Please include your agency name and number (45****) in the email subject line.

Please submit payrolls that apply to different tax years on different days in myCalPERS. For example, if you are reporting the last payroll for 2025 and first for 2026, please report 2025 first and then report 2026 the following business day. Thank you for your continued partnership as 2025 comes to an end.

End 2025 with a CalPERS 457 Plan review to help satisfy your fiduciary responsibility and prepare for the new year

We encourage you to meet with CalPERS each year to review your agency’s CalPERS 457 Plan. If you haven’t met with us this year, there’s still time to schedule a review and help satisfy your fiduciary responsibility. We can meet at a date and time that’s most convenient for you to help your employees achieve their retirement goals.

Email Dave Saavedra or call 916-795-3908 today to arrange a review.

CalPERS 457 Plan representatives are available for myCalPERS and payroll assistance. Email us or call 800-696-3907, Monday – Friday, 8 a.m. – 5 p.m. (Pacific Time).

Plan administration services provided by Voya Institutional Plan Services, LLC. Information from registered Plan Service Representatives is for educational purposes only and is not legal, tax or investment advice. Local Plan Service Representatives are registered representatives of Voya Financial Advisors, Inc. (member SIPC).

This newsletter was prepared by Voya Financial^®. Articles by Voya are not intended to provide tax or investment advice. Any opinions, advice, statements, services, offers or other information or content expressed or made available herein has not been independently verified by the California Public Employees’ Retirement System (CalPERS), nor does it necessarily state or reflect the views of CalPERS. Reference herein to any specific commercial products, processor service by trade name, trademark, manufacturer or otherwise does not necessarily constitute or imply its endorsement, recommendation or favoring by CalPERS. © 2025 Voya Services Company. All rights reserved

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