What's Changing for Employer-Sponsored Retirement Plans in 2025

Does your organization sponsor a qualified retirement plan for employees? If so, you’ll want to review the inflation-based adjustments affecting many key limits and thresholds in 2025. Staying informed helps ensure your plan remains compliant and competitive while supporting employees’ retirement goals. Here are the critical updates:

Contribution Limits for 401(k) and Similar Plans

The annual contribution limit for 401(k), 403(b), and 457 plans will increase to $23,500, up from $23,000 in 2024. Similarly, the annual contribution limit for Savings Incentive Match Plan for Employees (SIMPLE) IRAs will rise to $16,500 (up from $16,000).

Catch-Up Contributions for Older Participants

• The general catch-up contribution limit for 401(k), 403(b), and 457 plans will remain at $7,500 for participants age 50 and older.
• Under the SECURE 2.0 Act, a higher limit of $11,250 applies for participants who are 60, 61, 62, or 63 in 2025.
• For SIMPLE IRAs, the general catch-up contribution remains at $3,500, with a higher limit of $5,250 for those aged 60 to 63.

SEP-IRA Contributions

The contribution limit for Simplified Employee Pension Individual Retirement Accounts (SEP-IRAs) remains at 25% of compensation, up to $70,000 (an increase from $69,000). Note that catch-up contributions are not permitted for SEP-IRAs.

SEP-IRA Participation Threshold

The minimum compensation requirement for SEP-IRA eligibility will hold steady at $750.

Maximum Compensation for Qualified Plans

The annual compensation limit for determining contributions and deductions will rise to $350,000, up from $345,000.

Highly Compensated Employees

The threshold for determining highly compensated employee (HCE) status will increase to $160,000, up from $155,000.

Key Employees for Top-Heavy Plans

The compensation threshold for identifying a key employee will rise to $230,000, up from $220,000.

Retirement Savings Contributions Credit (Saver’s Credit)

The income limits for claiming the saver’s credit will increase as follows:

• $79,000 (up from $76,500) for married taxpayers filing jointly,
• $59,250 (up from $57,375) for heads of household, and
• $39,500 (up from $38,250) for all other filers.

Control Employees for Fringe Benefits Valuation

• For officers, the control employee threshold will increase to $140,000 (up from $135,000).
• For other employees, it will rise to $285,000 (up from $275,000).

Social Security Taxable Wage Base

The maximum earnings subject to Social Security tax will increase to $176,100, up from $168,600.

Next Steps

Most of these adjustments reflect inflationary changes and have broad implications for plan sponsors. Review these updates carefully and adjust employee communications, plan documents, and administrative procedures as needed. For personalized guidance on managing these changes or evaluating plan costs, contact us today.