2023 Limits and Thresholds for 401(k)s and Other Qualified Retirement Plans

The IRS recently announced the 2023 dollar limits and thresholds for qualified retirement plans, reflecting the latest cost-of-living adjustments. Here are some relevant amounts to be aware of:

Contribution limits for 401(k)s and other defined contribution plans. The annual limit on contributions will increase to $22,500 (up from $20,500) for 401(k), 403(b) and 457 plans, as well as for Salary Reduction Simplified Employee Pension plans (SARSEPs). The annual limits will rise to $15,500 (up from $14,000) for Savings Incentive Match Plans for Employees (SIMPLEs) and SIMPLE IRAs.

Catch-up contributions. The annual limit on catch-up contributions for individuals age 50 and over will increase to $7,500 (up from $6,500) for 401(k), 403(b) and 457 plans, as well as for SARSEPs. The annual limit for SIMPLEs and SIMPLE IRAs will go up to $3,500 from $3,000.

Compensation. The annual limit on the maximum compensation that can be taken into account for certain retirement plan contributions and deductions will rise to $330,000 (up from $305,000).

Highly compensated employees. The threshold for determining who’s a highly compensated employee will increase to $150,000 (up from $135,000).

Key employees. The threshold for determining whether an officer is a “key employee” under the top-heavy rules, as well as the cafeteria plan nondiscrimination rules, will rise to $215,000 (up from $200,000).

SEP annual contributions. The limit on annual contributions to these plans will increase to $66,000 (up from $61,000).

SEP participation. The threshold for determining participation in a SARSEP or SEP will rise to $750 from $650.

Saver’s tax credit. The upper income limit for determining whether certain individuals are eligible for the saver’s tax credit (also known as the retirement savings contributions credit) will increase to:

• $73,000 (up from $68,000) for taxpayers who are married and filing jointly,
• $54,750 (up from $51,000) for those filing as a head of household, and
• $36,500 (up from $34,000) for all other taxpayers.

“Control” employees. The amounts for determining who’s a control employee, a classification relevant to the valuation of company fringe benefits, will increase to $130,000 (up from $120,000) for a board or shareholder-appointed, confirmed, or elected officer, and to $265,000 (up from $245,000) for other employees.

Social Security taxable wage base. The annual cost-of-living adjustment to the maximum amount of earnings subject to Social Security tax, which is relevant for various benefit purposes, will rise to $160,200 (up from $147,000). This adjustment was announced in October by the Social Security Administration.

Compared with recent years, many of these amounts have notably increased because of inflation. Employers that sponsor 401(k)s and other defined contribution plans should carefully note the changes and, as necessary, review and revise employee communications, plan procedures and administrative forms.

HoganTaylor Employee Benefit Plans Practice

If you have any questions about the content of this publication, or if you would like more information about HoganTaylor's Employee Benefit Plans practice, please contact Gwen Mazzola, Employee Benefit Plans Practice Lead.

INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.