Cost of Living Adjustments for 2023

November 3, 2022  193  193   

On October 21, 2022, the IRS announced the Cost of Living Adjustments (COLAs) affecting the dollar limitations for retirement plans for 2023. Retirement plan limits increased well over the 2022 limits, the largest increase in over 45 years. COLA increases are intended to allow participant contributions and benefits to keep up with the “cost of living” from year to year. Here are the highlights from the new 2023 limits:

• The calendar year elective deferral limit increased from $20,500 to $22,500.
• The elective deferral catch-up contribution increased from $6,500 to $7,500. This contribution is available to all participants aged 50 or older in 2023.
• The maximum available dollar amount that can be contributed to a participant’s retirement account in a defined contribution plan increased from $61,000 to $66,000. The limit includes both employee and employer contributions as well as any allocated forfeitures. For those over age 50, the annual addition limit increases by $7,500 to include catch-up contributions.
• The maximum amount of compensation that can be considered in retirement plan compliance has been raised from $305,000 to $330,000.
• Annual income subject to Social Security taxation has increased from $147,000 to $160,200.

<tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><th aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="background-color: rgba(0, 0, 0, 0.125); padding: 0.75rem; border-top: 1px solid; border-right: 1px solid; border-left: 1px solid; border-bottom-color: initial;">Annual Plan Limits <th aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="background-color: rgba(0, 0, 0, 0.125); padding: 0.75rem; border-top: 1px solid; border-right: 1px solid; border-left: 1px solid; border-bottom-color: initial; text-align: right;">2023 <th aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="background-color: rgba(0, 0, 0, 0.125); padding: 0.75rem; border-top: 1px solid; border-right: 1px solid; border-left: 1px solid; border-bottom-color: initial; text-align: right;">2022 <th aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="background-color: rgba(0, 0, 0, 0.125); padding: 0.75rem; border-top: 1px solid; border-right: 1px solid; border-left: 1px solid; border-bottom-color: initial; text-align: right;">2021 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="1"> <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Elective Deferral Limit <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$22,500 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$20,500 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$19,500 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Catch-Up Contributions <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$7,500 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$6,500 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$6,500 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Annual Contribution Limit <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$66,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$61,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$58,000 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Annual Contribution Limit including Catch-Up Contributions <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$73,500 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$67,500 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$64,500 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Annual Defined Benefit Limit <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$265,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$245,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$230,000 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="1"> <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Maximum Plan Compensation <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$330,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$305,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$290,000 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Income Subject to Social Security <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$160,200 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$147,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$142,800 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Key EE Compensation Threshold <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$215,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$200,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$185,000 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Highly Compensated EE Threshold <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$150,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$135,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$130,000 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="1"> <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">SIMPLE Plan Elective Deferrals <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$15,500 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$14,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$13,500 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">SIMPLE Catch-Up Contributions <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$3,500 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$3,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$3,000 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">Individual Retirement Account (IRA) <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$6,500 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$6,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$6,000 <tr xmlns:aid="http://ns.adobe.com/AdobeInDesign/4.0/" aid:table="table" aid:trows="1" aid:tcols="4"><td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="130.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: left;">IRA Catch-Up Contribution <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$1,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$1,000 <td aid:table="cell" aid:crows="1" aid:ccols="1" aid:ccolwidth="40.5" style="padding: 0.75rem; border-color: initial; border-style: solid; text-align: right;">$1,000

Contribution and Benefit Limits

Compensation Limits

IRA Limits

 

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