Insight IRS Cost of Living Adjustments for Retirement Plans
On Friday, the Internal Revenue Service issued Notice 2022-55, providing its annual listing of cost of living adjustments in connection with retirement plans for 2023. The limits are generally used to determine amounts that may be contributed to retirement plans and to conduct nondiscrimination testing. As you can see (and as was expected), the adjustments are relatively large as compared to prior years.
Some more of the prominent limitations are as follows:
- Elective deferral limit (Section 401(k), 403(b), and 457 plans) – $22,500 (up from $20,500)
- Catch-up contribution limit – $7,500 (up from $6,500)
- Total contribution limit for defined contribution plans (such as 401(k) plans) – $66,000 (up from $61,000)
- Limitation on annual benefit under a defined benefit plan – $265,000 (up from $245,000)
- Annual compensation limit – $330,000 (up from $305,000)
- Dollar limit to determine officers as “key employees” – $215,000 (up from $200,000)
- Dollar limit to determine “highly compensated employees” – $150,000 (up from $135,000)
- IRA contribution limit – $6,500 (up from $6,000)
On a related note, the maximum amount that may be contributed to a flexible spending account for a year was recently increased to $3,050 for 2023.
Please let us know if you have any questions about these limits or related issues.
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