12 November 2024 IRS releases qualified retirement plan limitations for 2025: 401(k) pretax limit increases to $23,500 The dollar limitations for retirement plans and certain other dollar limitations that become effective January 1, 2025, have been released by the IRS in Notice 2024-80. The dollar limitations are adjusted annually for inflation and, consequently, most of them are changed for 2025. Of note, the 2025 pretax limit that applies to elective deferrals to IRC Section 401(k), 403(b) and 457(b) plans increased from $23,000 to $23,500. The dollar limitation for catch-up contributions for participants aged 50 or over remains at $7,500. Plan participants may wish to consider the impact of the dollar limitations for 2025 in their overall financial planning. A summary of some of the cost-of-living adjustments for 2024 and 2025 is provided below. Past year limits are also posted on the IRS website in a historical table. Description | 2024 | 2025 | Participant pretax contribution limit for IRC Section 401(k) and 403(b) plans IRC Section 402(g)(1) | $23,000 | $23,500 | Deferral limit for deferred compensation plans of state and local governments and tax-exempts IRC Section 457(e)(15) | $23,000 | $23,500 | Dollar limit for catch-up contributions for participants aged 50 or over in IRC Section 401(k), 403(b), governmental IRC Section 457(b) plans and Simplified Employee Pensions (SEPs) IRC Section 414(v)(2)(B)(i) | $7,500 | $7,500 | Dollar limit for catch-up for contributions for participants aged 50 or over in a SIMPLE IRA or a SIMPLE 401(k) IRC Section 414(v)(2)(B)(ii) | $3,500 | $3,500 | Defined benefit plan annual benefit limit1 IRC Section 415(b)(1)(A) | $275,000 | $280,000 | Defined contribution plan contribution limit IRC Section 415(c)(1)(A) | $69,000 | $70,000 | Maximum ESOP account balance subject to a 5-year distribution period/increments for additional year IRC Section 409(o)(1)(C)(ii) | $1,380,000/$275,000 | $1,415,000/$280,000 | Highly-compensated employee dollar threshold IRC Section 414(q)(1)(B) | $155,000 | $160,000 | Definition of key employee in a top-heavy plan — officer compensation threshold IRC Section 416(i)(1)(A)(i) | $220,000 | $230,000 | Annual limit on includible compensation for benefits and allocations2 IRC Sections 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii) | $345,000 | $350,000 | SEP employee participation floor IRC Section 408(k)(2)(C) | $750 | $750 | SIMPLE IRA and SIMPLE 401(k) contribution limit IRC Section 408(p)(2)(E) | $16,000 | $16,500 | Compensation amount for control employees for fringe benefit valuation purposes Treas. Reg. Section 1.61-21(f)(5)(i) and (iii) | $135,000/$275,000 | $140,000/$285,000 |
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Endnotes1 For a participant who separated from service before January 1, 2025, the participant's limitation under a defined benefit plan under IRC Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2024, by 1.0262. 2 For eligible participants in certain governmental plans that allow cost of living adjustments to the compensation limit to be taken into account, that limit is increased to $520,000 for 2025, up from $505,000 in 2024. | | * * * * * * * * * * | | Contact Information | For additional information concerning this Alert, please contact: Workforce Tax Services - Employment Tax Advisory Services | | Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor |
Document ID: 2024-2075 |
