The IRS recently announced the 2023 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans. The IRS significantly increased the applicable limits for 2023 due to the high rate of inflation in 2022. The following limits apply to retirement plans in 2023:
- The limit on elective deferrals under 401(k), 403(b), and eligible 457(b) plans increased to $22,500.
- The limit on additional catch-up contributions by participants age 50 or older increased to $7,500. This means that the maximum amount of elective deferral contributions for those participants in 2023 is $30,000.
- The Internal Revenue Code (“Code”) Section 415 annual addition limit is increased to $66,000 for 401(k) and other defined contribution plans, and the annual benefit limit is increased to $265,000 for defined benefit plans.
- The limit on the annual compensation that can be taken into account by qualified plans under Code Section 417 is increased to $330,000.
- The dollar- level threshold for becoming a highly compensated employee under Code Section 414(q) increased to $150,000 (which, based on the look-back rule, is applicable for HCE determinations in 2024 based on compensation in 2023).
- The dollar- level threshold for becoming a “key employee” in a top-heavy plan under Code Section 416(i)(1) is increased to $215,000.
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