The IRS announced Cost of Living Adjustments affecting certain dollar limitations for pension plans and other retirement-related limitations for 2024 in Notice 2023-75.
Contribution and benefit 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 2024 limits:
- The amount individuals can contribute to their 401(k) plans (not to mention 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan) in 2024 has increased to $23,000, up from $22,500 for 2023.
- The limit on annual contributions to an IRA increased to $7,000 (up from $6,500), and while the IRA catch up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act (SECURE 2.0) to include an annual cost of living adjustment, it also holds steady at $1,000 for 2024.
- The limitation on the annual benefit under a defined benefit plan is increased from $265,000 to $275,000.
- The limitation for DC plans is increased in 2024 from $66,000 to $69,000.
- The limitation on the exclusion for elective deferrals is increased from $22,500 to $23,000.
- The annual compensation limit is increased from $330,000 to $345,000.
- The dollar limitation concerning the definition of “key employee” in a top-heavy plan is increased from $215,000 to $220,000.
- The dollar amount for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is increased from $1,330,000 to $1,380,000, while the dollar amount used to determine the lengthening of the 5-year distribution period is increased from $265,000 to $275,000.
- The limitation used in the definition of “highly compensated employee” is increased from $150,000 to $155,000.
- The compensation amount regarding simplified employee pensions remains $750.
- The limitation regarding SIMPLE retirement accounts is increased from $15,500 to $16,000.
The following chart details 2024 retirement plan dollar limitation cost-of-living adjustments:
| Annual Plan Limits | 2024 | 2023 | 2022 |
|---|---|---|---|
| Contribution and Benefit Limits | |||
| Elective Deferral Limit | $23,000 | $22,500 | $20,500 |
| Catch-Up Contributions | $7,500 | $7,500 | $6,500 |
| Annual Contribution Limit | $69,000 | $66,000 | $61,000 |
| Annual Contribution Limit including Catch-Up Contributions | $64,500 | $63,500 | $62,000 |
| Annual Benefit Limit | $275,000 | $265,000 | $245,000 |
| Compensation Limits | |||
| Maximum Plan Compensation | $345,000 | $330,000 | $305,000 |
| Income Subject to Social Security | $168,600 | $160,200 | $147,000 |
| Key EE Compensation Threshold | $220,000 | $215,000 | $200,000 |
| Highly Compensated EE Threshold | $155,000 | $150,000 | $135,000 |
| IRA Limits | |||
| SIMPLE Plan Elective Deferrals | $16,000 | $15,500 | $14,000 |
| SIMPLE Catch-Up Contributions | $3,500 | $3,500 | $3,000 |
| Individual Retirement Account (IRA) | $7,000 | $6,500 | $6,000 |
| IRA Catch-Up Contribution | $1,000 | $1,000 | $1,000 |
Our Annual Limits chart is always available on our website HERE.