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November 2022: IRS Announces 2023 Retirement Plan Limits

02 Nov


Update Applicable to:
All employers.

What happened?
On October 21, 2022, the Internal Revenue Service (IRS) released Notice 2022-55, containing cost-of-living adjustments for 2023 that affect the amounts employees can contribute to 401(k) plans and individual retirement accounts (IRAs).

What are the details?
Effective January 1, 2023, the employee contribution limit for 401(k) plans in 2023 has increased to $22,500, up from $20,500 for 2022. Other key limit increases include the following:

  • The employee contribution limit for IRAs is increased to $6,500, up from $6,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $7,500, up from $6,500.
  • The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans is increased to $15,500, up from $14,000.
  • The limits used to define a “highly compensated employee” and a “key employee” are increased to $150,000 (up from $135,000) and $215,000 (up from $200,000), respectively.
  • The annual limit for defined contribution plans (for example, 401(k) plans, profit-sharing plans, and money purchase plans) is increased to $66,000, up from $61,000.
  • The annual compensation limit (applicable to many retirement plans) is increased to $330,000, up from $305,000.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs, contribute to Roth IRAs and claim the Saver’s Credit (also known as the Retirement Savings Contributions Credit) also increased for 2023. The IRS news release contains more details.

For more information, please see the links below:

IRS News Release

Notice 2022-55

What do employers need to do?
Employers should review the links provided above and notify their employees so that they are properly informed.

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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