The Internal Revenue Service has announced cost-of-living-adjusted limits for2023 that affect the operation of tax-qualified retirement plans, including 401(k) plans and certain other types of employee benefit plans, such as deferred compensation plans that may be subject to Internal Revenue Code ยง409A. The amount by which the limits are adjusted each year is based on a cost-of-living index, and not all limits increase every year. For 2023, however, all of the plan-related, cost-of-living-adjusted limits listed below have increased from 2022. In connection with the increased limits for 2023, employers should revise participant communications and election forms, amend plan documents and summary plan descriptions, and update all payroll and/or human resources systems with the new dollar amount limitations.
The Social Security Old-Age, Survivors, and Disability Insurance (OASDI) taxable wage base, which governs the amount of pay subject to Social Security tax withholding and affects plans that are "integrated" with Social Security, also is subject to adjustment annually. For 2023, the OASDI taxable wage base has been increased to $160,200.
Adjusted limits
|
Provision |
2023 limit |
|
Maximum 401(k) contributions |
$22,500 |
|
Maximum compensation limit |
$330,000 |
|
Highly compensated employees |
|
|
Key employee compensation limit |
$215,000 |
|
Annual contribution limit for defined contribution plans |
$66,000 |
|
Annual benefit limit for defined benefit plans |
$265,000 |
|
SIMPLE plan limit |
$15,000 |
|
Age 50 and older catch-up contribution limit All plans other than SIMPLE plans |
|
|
Annual contribution limit for Section 457 deferred compensation plans (government and tax-exempt organizations) |
$22,500 |
|
Employee stock ownership plan (ESOP) Maximum account balance subject to five-year
distribution period |
|
|
Simplified employee pension (SEP) plans |
|
|
409A minimum specified employee (officer) compensation requirement |
$215,000 |
|
409A involuntary separation pay exception |
$660,000 |
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.
