Compliance Corner

Retirement Updates

IRS Announces 2023 Limits on Benefits and Contributions for Qualified Retirement Plans

November 08, 2022

On October 21, 2022, the IRS issued Notice 2022-55, which provides certain cost-of-living adjustments for a wide variety of tax-related items, including retirement plan contribution maximums and other limitations. Several key figures are highlighted below. These cost-of-living adjustments are effective January 1, 2023.

The elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan increases from $20,500 to $22,500 in 2023. Additionally, the catch-up contribution limit for employees aged 50 and over who participate in any of these plans increases from $6,500 to $7,500. Accordingly, participants in these plans who have reached age 50 will be able to contribute up to $30,000 in 2023.

The annual limit for Savings Incentive Match Plan for Employees (SIMPLE) retirement accounts has increased from $14,000 to $15,500.

The annual limit for defined contribution plans under Section 415(c)(1)(A) increases to $66,000 (from $61,000). The limitation on the annual benefit for a defined benefit plan under Section 415(b)(1)(A) also increases to $265,000 (from $245,000). Additionally, the annual limit on compensation that can be considered for allocations and accruals increases from $305,000 to $330,000.

The threshold for determining who is a highly compensated employee under Section 414(q)(1)(B) increases to $150,000 (from $135,000). The dollar limitation concerning the definition of a key employee in a top-heavy plan increases from $200,000 to $215,000.

Employers should review the notice for additional information. Sponsors of benefits with limits that are changing will need to determine whether their plan documents automatically apply the latest limits or must be amended to recognize the adjusted limits. Any applicable changes in limits should also be communicated to employees.

Notice 2022-55 Â»