ARTICLE
12 November 2024

2025 Cost-of-Living Adjustments

The IRS and Social Security Administration have announced the 2025 cost-of-living adjustments for retirement plans. Here are some of the more significant limitations affecting employee benefit plans.
United States Employment and HR

The IRS and Social Security Administration have announced the 2025 cost-of-living adjustments for retirement plans.

Here are some of the more significant limitations affecting employee benefit plans:

  • The maximum amount that may be deferred under 401(k), 403(b) and 457(b) plans, not including catch-up deferrals, under Internal Revenue Code Section 402(g) limit, is increased from $23,000 to $23,500.
  • The IRC Section 415 maximum annual benefit under a defined benefit plan is increased by $5,000 to $280,000.
  • The IRC Section 415 maximum annual additions under a defined contribution plan will be increased by $1,000 to $70,000, subject to the overall limitation of 100% of compensation.
  • The highly compensated employee threshold dollar limit is increased to $160,000.
  • The maximum amount of compensation that may be considered for benefit purposes under a qualified plan will be increased from the current limit of $345,000 to $350,000.
  • The catch-up deferrals to 401(k), 403(b) and 457 plans remain unchanged at $7,500. Please note that the catch-up deferrals are only available for plan participants who turn 50 at any time during the plan year and who may no longer make deferrals because of plan or regulatory limitations.
  • The Social Security taxable wage base is increased by $7,500 to $176,100, which is more than double the average increase over the prior five-year period.

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.

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