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2023 Retirement Plan Limits Announced

The Internal Revenue Service announced new dollar limits for retirement plans for 2023, with most limits showing a sizeable increase over 2022 amounts. The new annual 401(k) elective deferral limit is $22,500 with a $7,500 catch up for those age 50 or older, permitting $30,000 to be contributed annually, or $5,000 per month. Plan sponsors should also note that the compensation threshold to determine highly compensated employees increases from $135,000, to $150,000, which is measured based on prior year’s compensation. The rest of the new limits are shown below:

The above information is a brief summary of legal developments that is provided for general guidance only and does not create an attorney-client relationship between the author and the reader. Readers are encouraged to seek individualized legal advice in regard to any particular factual situation. © 2022 Christine P. Roberts, all rights reserved.

Photo credit: Rodion Kutsaiev, Unsplash

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IRS Announces 2022 Retirement Plan Limits

On November 4, 2021, the IRS announced 2022 cost-of-living adjustments for annual contribution and other dollar limits affecting 401(k) and other retirement plans.  The maximum annual limit on salary deferral contributions to 401(k), 403(b), and 457(b) plans increased $1,000 to $20,500, but the catch-up contribution limit for employees aged 50 and older stayed the same at $6,500.  That raises the total deferral limit for a participant aged 50 or older to $27,000.  The Section 415(c) dollar limit for annual additions to a retirement account was increased to $61,000 from $58,000, and the $6,500 catch-up limit increases that to $67,500 for participants aged 50 or older.   In addition, the maximum limit on annual compensation under Section 401(a)(17) increased to $305,000 from $290,000, and the compensation threshold for Highly Compensated Employees increased to $135,000, from $130,000.  Other dollar limits that increased for 2021 are summarized below; citations are to the Internal Revenue Code.  Unchanged were the annual deductible IRA contribution and age 50 catch-up limit ($6,000 and $1,000, respectively), and the age 50 SIMPLE catch-up limit of $3,000.  In a separate announcement, the Social Security Taxable Wage Base for 2022 increased to $147,000 from the prior limit of $142,800 in 2021.

Photo credit: Atturi Jalli, Unsplash.

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The Song Remains the Same: Few 2021 COLA Adjustments for Retirement Plans

On October 26, 2020, the IRS announced 2021 cost-of-living adjustments for annual contribution and other dollar limits affecting 401(k) and other retirement plans.  The maximum annual limit on salary deferral contributions to 401(k), 403(b), and 457 plans remained the same for 2021 as it was in 2020, at $19,500, and the catch-up contribution limit for employees age 50 and older also stayed the same at $6,500.  The SIMPLE employee contribution limit of $13,500 was also unchanged, as were the annual deductible IRA contribution and age 50 catch-up limits ($6,000 and $1,000, respectively).  The Section 415(c) dollar limit for annual additions to a retirement account was increased to $58,000 from $57,000 and the maximum limit on annual compensation under Section 401(a)(17) increased from $285,000 to $290,000.  Below we list the changed and unchanged dollar limits for 2021. Citations below are to the Internal Revenue Code. (Click on the chart for a larger image.)

In a separate announcement, the Social Security Taxable Wage Base for 2021 increased to $142,800 from the prior limit of 137,700 in 2020.

The above information is a brief summary of legal developments that is provided for general guidance only and does not create an attorney-client relationship between the author and the reader. Readers are encouraged to seek individualized legal advice in regard to any particular factual situation. (c) 2020 Christine P. Roberts, all rights reserved.

Photo Credit: Jude Beck, Unsplash

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2020 COLA Adjustments Announced

On November 5, 2019, the IRS announced 2020 cost-of-living adjustments for annual contribution and other dollar limits affecting 401(k) and other retirement plans.  The maximum limit on salary deferral contributions to 401(k) and 403(b) plans increased $500 to $19,500 and a number of other dollar limits increased.  Citations below are to the Internal Revenue Code.

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In a separate announcement, the Social Security Taxable Wage Base for 2020 increased to $137,700 from $132,900 in 2019.

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2019 COLA Adjustments: Let’s Do the Numbers

On November 1, 2019, the IRS announced 2019 cost-of-living adjustments for annual contribution and other dollar limits affecting 401(k) and other retirement plans.   Salary deferral limits to 401(k) and 403(b) plans increased $500 to $19,000, and a number of other dollar limits increased.  Citations below are to the Internal Revenue Code.

In a separate announcement, the Social Security Taxable Wage Base for 2019 increased to $132,900, from $128,400 in 2018.

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COLA Increases Raise 2012 Contribution Limits

A 3.6% Social Security cost of living increase for 2012 has triggered increases in annual contribution and other dollar limits affecting 401(k) and other retirement plans, the Internal Revenue Service announced on October 20, 2011. These dollar limits were static from 2009 through 2011 due to the floundering economy. Here are some of the key changes (citations are to the Internal Revenue Code):

–Salary Deferral Limit for 401(k), 403(b), and 457 plans increases from $16,500 to $17,000. (The age 50 and up catch-up limit remains unchanged at $5,500, however.)

–Maximum total contribution to a 401(k) or other “defined contribution” plans under 415(c) increased from $49,000 to $50,000 ($55,500 for employees aged 50 and older).

–Maximum amount of compensation on which contributions may be based under 401(1)(17) increased from $245,000 to $250,000.

–Compensation threshold for “highly compensated employee” increased from $110,000 to $115,000.

–Dollar limit defining “key employee” in a top-heavy plan increased from $160,000 to $165,000.

–Maximum annual benefit under a defined benefit plan increased from $195,000 to $200,000.

–Social Security Taxable Wage Base increased from $106,800 to $110,100.

–IRA contribution and catch-up limits remain $5,000 and $1,000, respectively.