On October 21, the Internal Revenue Service announced its annual
cost of living adjustments for calendar year 2023. Importantly for
retirement plan sponsors, administrators, and participants, certain
plan limits are increasing from the 2022 limits due to inflationary
changes in the cost-of-living index. For example, the overall
defined benefit annual limitation (Internal Revenue Code
("IRC") §415(b)) increased to $265,000 (up from
$245,000), the overall defined contribution annual limitation (IRC
§415(c)) increased to $66,000 (up from $61,000), the annual
compensation limit (IRC § 401(a)(17), IRC § 404(l), IRC
§ 408(k)(3)(C) and IRC § 408(k)(6)(D)(ii)) increased to
$330,000 (up from $305,000), the limitation on the exclusion for
elective deferrals (IRC § 402(g)(1)) increased to $22,500 (up
from $20,500)), and the catch-up deferral for people aged 50 and
older (IRC § 414(v)(2)(B)(i)) increased to $7,500 (up from
$6,500). Notably, the increases to the IRC § 415(b) defined
benefit annual limitation, the IRC § 415(c) defined
contribution annual limitation, the IRC § 401(a)(17) annual
compensation limitation, and the IRC § 414(v)(2)(B)(i)
catch-up deferral for people aged 50 and older are the largest
increases in recent years.
To assist plan sponsors, Ice Miller's updated Cost of Living Adjustment (COLA) chart
lists the cost-of-living adjustments to retirement plan limitations
for the years 2013 through 2023. We hope that this chart (which
includes the adjusted limits, as well as Pension Benefit Guaranty
Corporation guarantees and Social Security and Medicare
contribution rates and wage bases for the past 10 years) will serve
as a helpful reference tool.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
