Published: February 27, 2026 | Updated: March 22, 2026 | By Trust Integritas
Key Takeaways
- IRS Notice 2025-67 raises the 2026 employee 401(k) deferral limit to$24,500, up from $23,500 – payroll systems must reflect this by January 1, 2026 (IRS, 2025).
- Only7% of cannabis workersare enrolled in a retirement plan, versus 52% nationally – a gap that widens with every plan that goes unupdated (The Marijuana Herald, 2026).
- As of early 2026,17 states have active retirement plan mandates– meaning for many cannabis operators, offering a qualified plan is now a legal requirement, not a benefit option (Betterment for Work, 2026).
The IRS doesn’t wait for the cannabis industry to catch up. Every fall, it issues cost-of-living adjustments through official notices that reset the ceilings on retirement plan contributions, compensation caps, and tax-deferred savings vehicles. For most businesses, this is a software update. For cannabis operators, it’s something more complicated – and the stakes are rising.
IRS Notice 2025-67, published in November 2025, sets the 2026 plan limits under Section 415 of the Internal Revenue Code. The numbers are firm. The deadlines are real. And the competitive consequences for operators who ignore them are growing harder to dismiss.
This guide breaks down what changed, why it matters specifically to cannabis businesses, and what you need to do before January 1, 2026.
Are You Leaving Tax Savings on the Table for Your Employees?
Cannabis employer 401(k) plan adoption grew 800% between 2021 and 2025, yet only 7% of cannabis workers are currently enrolled in a retirement plan – compared to 52% in other industries (The Marijuana Herald, 2026). That gap doesn’t just reflect low participation. It reflects a structural failure that new IRS limits are making more visible every year.
The IRS adjusts contribution limits annually using a cost-of-living methodology tied to the Consumer Price Index, similar to adjustments made under the Social Security Act. For traditional businesses, updating payroll software is routine. For cannabis companies, it’s a test of operational maturity in a sector where every federal compliance decision carries disproportionate risk.
When limits go up, the value proposition of an employer-sponsored plan increases automatically. If you haven’t updated your administration system to reflect the higher ceilings, you’re blocking employees from accessing legal tax savings – and sending a signal to the talent market that your HR infrastructure isn’t keeping pace. Neither problem fixes itself.
The SECURE 2.0 Act is also part of this picture. Startup tax credits for new qualified plans were raised from 50% to 100% of administrative costs for employers with 50 or fewer employees (GreenPath 401(k), 2024). Many cannabis operators can now launch a plan with minimal cost. The question is whether they keep it current once it’s running.
Cannabis industry 401(k) assets surpassed $71 million in early 2026 – a figure reflecting 800% plan growth since 2021 – yet employee participation sits at just 7%, versus the 52% national average, according to the first-ever cannabis retirement industry report (The Marijuana Herald, 2026). The industry is building the infrastructure; the participation gap is the next problem to solve.
What Are the Actual 2026 IRS Limits Cannabis Operators Need to Know?
IRS Notice 2025-67 was published in November 2025 and takes effect January 1, 2026 (IRS.gov). Here are the figures that directly affect most cannabis 401(k) plans – and the practical consequences of getting them wrong.
| Limit Type | 2025 Amount | 2026 Amount | Change |
|---|---|---|---|
| Employee elective deferral (§402(g)(1)) | $23,500 | $24,500 | +$1,000 |
| Total DC contribution ceiling (§415(c)(1)(A)) | $70,000 | $72,000 | +$2,000 |
| Catch-up contribution, age 50+ (§414(v)(2)(B)(i)) | $7,500 | $8,000 | +$500 |
| Annual compensation cap (§401(a)(17)) | $350,000 | $360,000 | +$10,000 |
| SEP minimum compensation (§408(k)(2)(C)) | $750 | $800 | +$50 |
Employee Elective-Deferral Limit – Section 402(g)(1)
The most immediate change: employees can now defer up to $24,500 into a 401(k) per year, up from $23,500. That’s a $1,000-per-person increase that must be in your payroll system by the first pay period of 2026. Miss that deadline and employees literally cannot contribute at the legal maximum. You’re offering a plan that looks compliant but falls short in practice.401(k) Elective Deferral Limits: 2022–2026$20k$21k$22k$23k$24k$20,5002022$22,5002023$23,0002024$23,5002025$24,5002026Source: IRS Notice 2025-67 | IRS.gov | trust-integritas.comThe 2026 deferral limit of $24,500 represents the steepest single-year increase in the last four years. Source: IRS.gov, 2025.
Total Defined Contribution Ceiling – Section 415(c)(1)(A)
The ceiling on combined employer and employee contributions rises from $70,000 to $72,000. This is the number that governs the total annual scope of your plan. If your plan includes profit-sharing or employer match components, this is the figure your plan documents need to reference. It’s not optional language – it’s a hard statutory limit.
Catch-Up Contributions for Employees 50 and Older – Section 414(v)(2)(B)(i))
The catch-up limit rises from $7,500 to $8,000. A $500 increase sounds modest. But think about who benefits most: experienced compliance managers, operations directors, and lab scientists in their 50s. These are exactly the hires cannabis companies struggle to attract and keep. They’ve worked inside federal regulatory environments before. They read benefits packages carefully. Getting this limit right matters more for senior talent than the elective-deferral increase does.
Annual Compensation Cap – Sections 401(a)(17) and 404(i)
This one surprises people. The cap on eligible compensation for plan-calculation purposes rises from $350,000 to $360,000. If your plan uses a percentage-match formula based on compensation, an outdated cap creates two distinct problems. You may under-contribute for high earners, and you may produce inaccurate nondiscrimination test results – both of which carry correction costs and audit exposure. A $10,000 change to the compensation cap can have five-figure consequences for larger operations.
For 2026, IRS Notice 2025-67 sets the employee 401(k) deferral limit at $24,500, the total defined-contribution ceiling at $72,000, and the annual compensation cap at $360,000 – all figures that must be encoded in plan documents and payroll systems before January 1, 2026 (IRS, 2025). The 2026 deferral increase is the largest single-year jump since SECURE 2.0 took effect (ASPPA, 2025).
Why Does Federal Schedule I Status Make These Routine Updates More Complicated?
In most industries, IRS limit updates are purely administrative. In cannabis, they expose a structural tension that good intentions alone can’t resolve.
Plan administrators and recordkeepers operate under ERISA – a federal statute. The IRS issues these adjustments through the Treasury Department. But the funds being deferred come from revenue generated by activity that, at the federal level, still involves a Schedule I controlled substance. That conflict doesn’t make a compliant 401(k) impossible, but it narrows your options considerably.
A generic plan administrator may clear routine anti-money-laundering due diligence in year one without issue. But as plan assets grow, scrutiny increases. The cannabis industry’s collective 401(k) assets have already surpassed $71 million (The Marijuana Herald, 2026). At that scale, a compliance review that flags the source of funds can freeze contribution processing mid-year. The plan doesn’t fail, but access is disrupted – and employees notice. That’s a genuine operational crisis, not a paperwork problem.
A 2022 National Cannabis Industry Association survey found that 60% of cannabis businesses face challenges accessing standard banking services (GreenPath 401(k), 2024). The same friction extends to ERISA plan administration. The practical argument for cannabis-specialized administrators isn’t that they offer different numbers from IRS Notice 2025-67 – those numbers apply equally to everyone. The difference is that they’ve already cleared the legal and compliance hurdles that generic providers hit unexpectedly, sometimes years into a relationship.
A 2022 NCIA survey found 60% of cannabis businesses face challenges accessing standard banking services (GreenPath 401(k)/NCIA, 2022). That same friction extends to ERISA plan administration, where anti-money-laundering compliance requirements can disrupt contribution processing for cannabis plan sponsors that rely on administrators without cannabis-specific experience.
Can a Fully Updated Benefits Package Actually Reduce Cannabis’s 55% Turnover Rate?
Cannabis industry turnover has reached as high as 55% – well above the national average for most service sectors (Enjoy Würk, 2025). At the same time, average salaries dropped 4-7% across key roles in 2025, with budtender median pay falling from $42,000 to $36,600 in a single year (Enjoy Würk, 2025). Wages are down. Turnover is up. A fully updated, professionally administered retirement plan isn’t a nice-to-have in that environment – it’s one of the few stabilizing tools still available.
Here’s the competitive reality worth sitting with for a moment. Cannabis businesses compete for compliance managers, lab scientists, and operations staff against pharmaceutical companies, agricultural firms, and consumer goods brands – all federally legal, all offering benefits that clear standard due diligence without a second look. A candidate comparing offers will notice whether your plan reflects the 2026 deferral limit or is still set at 2025 figures. It sounds minor. But it signals whether your HR infrastructure is genuinely professional or performing compliance theater.
The average cannabis plan participant is just 33 years old, with an average account balance of $6,547 (The Marijuana Herald, 2026). These are early-career workers. They’re more financially aware than any previous generation. Showing them a plan with current limits – and communicating it clearly – builds the kind of institutional trust that raises retention among exactly the segment of the workforce most likely to walk out the door otherwise.
Cannabis industry turnover has hit 55%, while average salaries fell 4-7% in 2025 alone (Enjoy Würk, 2025). For operators competing against federally legal employers for experienced talent, a fully updated 401(k) plan reflecting 2026 IRS limits functions as a retention signal – one that payroll increases alone can’t replicate in a margin-compressed market.
What Else in IRS Notice 2025-67 Affects Cannabis Benefits Strategy?
The 401(k) deferral limit tends to dominate this conversation. But Notice 2025-67 adjusts more than a dozen separate figures, several of which affect how cannabis operators communicate benefits value to employees at every income level.
The Saver’s Credit – Section 25B
The adjusted gross income thresholds for the Retirement Savings Contributions Credit shift upward in 2026. For married taxpayers filing jointly, the lowest income tier for eligibility increases – meaning more lower- and middle-income cannabis employees qualify for this federal credit when they contribute to the company plan. This isn’t just a tax benefit. It’s a communication opportunity. When your benefits team can show employees a concrete dollar value for participating, enrollment rates go up. The industry’s 7% participation rate is partly a communication gap. These adjusted thresholds give you better material to work with.401(k) Participation: Cannabis vs. National AverageNational Average52%Cannabis Industry7%0%25%50%+Source: The Marijuana Herald, First Cannabis Retirement Industry Report (2026) | trust-integritas.comCannabis 401(k) participation sits at just 7% – a fraction of the 52% national average. Updated plan limits and clearer employee communication are key levers for closing this gap. Source: The Marijuana Herald, 2026.
IRA Phase-Out Ranges – Sections 219(g) and 408A
The income thresholds for deducting Traditional IRA contributions and contributing to Roth IRAs are adjusted upward. Single filers who are active plan participants can now deduct IRA contributions through $81,000-$91,000 in adjusted gross income (up from $79,000-$89,000). For married couples filing jointly, the range shifts to $129,000-$149,000. What this means practically: more of your employees can contribute to both the company 401(k) and a personal IRA simultaneously. Coordinating that story is a hallmark of a mature benefits program – and it costs nothing to communicate.
SEP Contributions – Section 408(k)(2)(C)
The minimum compensation threshold for Simplified Employee Pensions rises from $750 to $800. Small cannabis operators using SEPs instead of a full 401(k) need this reflected in plan documents. It’s a minor adjustment. But every unaddressed item in Notice 2025-67 has a paperwork trail – and every unresolved trail is a potential compliance gap when an audit examiner is working their way through your files.
IRS Notice 2025-67 adjusts over a dozen retirement-related limits for 2026 – including IRA phase-out thresholds, Saver’s Credit income tiers, and SEP minimums – all requiring coordinated updates across plan documents, Summary Plan Descriptions, and administrative software by January 1, 2026 (IRS Notice 2025-67, 2025).
Is Your State Now Requiring You to Offer a Retirement Plan?
This is the question most cannabis operators aren’t asking – but should be. As of early 2026, 17 states have active retirement plan mandate programs, and 20 states have passed the legislation required to launch them (Betterment for Work, 2026). For a large and growing share of cannabis businesses, a qualified retirement plan isn’t a competitive differentiator. It’s a legal requirement.
California requires compliance from businesses with even a single employee, with December 31, 2025 as the deadline for the final implementation tier. New York’s mandate covers businesses with 10 or more employees, with rolling deadlines running through mid-2026. Vermont phases in through July 2026. Minnesota launched its voluntary period in January 2026, with mandatory enrollment to follow. Non-compliance penalties start at $20 per eligible employee per year – and escalate.
Cannabis businesses in these states face the same mandate deadlines as any other employer. State programs generally don’t carve out exemptions based on industry. If your operation is in a mandate state and you’re not offering a qualified plan or auto-enrolling employees in the state-run IRA, you’re already out of compliance.
As of early 2026, 17 states have active retirement mandate programs requiring private employers – including cannabis businesses – to sponsor a qualified plan or enroll employees in a state-facilitated IRA, with non-compliance penalties starting at $20 per eligible employee per year (Betterment for Work, 2026). The number of active programs has more than doubled since 2022.
Frequently Asked Questions
Does IRS Notice 2025-67 apply to cannabis businesses the same way it applies to other employers?
Yes. The adjustments in Notice 2025-67 apply to all qualified retirement plans under ERISA, including those sponsored by cannabis businesses. The numbers are identical. The difference for cannabis operators is the compliance complexity around plan administration – specifically, the fact that cannabis revenue derives from activity that federal law still classifies as a Schedule I substance.
What happens if we don’t update our 401(k) limits by January 1, 2026?
Employees can’t contribute above the prior year’s ceiling, which reduces the value of your plan in concrete dollars. More seriously, if the compensation cap isn’t updated and your plan uses it in a nondiscrimination testing formula, the test results will be wrong. A failed nondiscrimination test can require corrective contributions, refunds to highly compensated employees, or both – and it generates a compliance record that invites further scrutiny.
Can cannabis businesses take advantage of the SECURE 2.0 startup tax credits?
Yes. SECURE 2.0 raised startup tax credits for new qualified plans from 50% to 100% of administrative costs for employers with 50 or fewer employees. Cannabis businesses are eligible on the same basis as other employers – the credit attaches to the plan structure, not the industry. For many small operators, this means a first-year plan cost close to zero.
What is the 2026 employee 401(k) deferral limit?
For 2026, employees can defer up to $24,500 of their compensation into a 401(k), 403(b), or most 457(b) plans – up from $23,500 in 2025, per IRS guidance. Employees aged 50 or older can add a catch-up contribution of up to $8,000, for a total of $32,500.
Do state retirement plan mandates apply to cannabis employers?
Yes, in states with active mandates. As of early 2026, 17 states have active programs requiring most private employers to either sponsor a qualified plan or auto-enroll employees in a state-run IRA. Cannabis businesses operating in California, New York, Vermont, Illinois, Oregon, and several others must comply or face per-employee penalties. These mandates don’t include industry carve-outs for cannabis.
Moving from Compliance Minimum to Strategic Advantage
The 2026 cost-of-living adjustments from IRS Notice 2025-67 are a clear reminder that the rules of established finance apply fully to cannabis – whether the industry’s revenue moves cleanly through federal banking or not. Rising deferral limits create real opportunities to improve employee financial wellness and retention. But those opportunities only materialize if the underlying plan architecture is solid enough to hold up under federal scrutiny.
The cannabis industry has built real momentum. 401(k) plan assets passed $71 million. Plan adoption grew 800% in four years. The infrastructure is forming. What’s lagging is the operational discipline to keep it current – and the specialized oversight to keep it defensible. Those two gaps are exactly what the annual IRS notice cycle is designed to close, for the operators who take it seriously.
Trust Integritas specializes in structuring ERISA-compliant retirement plans for cannabis industry employers. For guidance on updating your plan for the 2026 IRS limits, visit Trust-Integritas.com.