The IRS has announced the new retirement plan limits for 2023. As expected, limits increased by larger amounts than we’ve seen in more than a decade, reflecting the high CPI rates in 2022. Highlights include:
- The compensation limit used in determining benefits and contributions for both defined benefit and defined contribution plans is increased from $305,000 to $330,000.
- For defined benefit plans (including cash balance), the maximum annual benefit for a participant with at least ten years of participation and a normal retirement age between 62 and 65 increased from $245,000 to $265,000.
- For defined contribution plans (profit sharing and 401(k) plans), the maximum annual contribution for a participant increased from $61,000 to $66,000. While this limit includes salary deferrals, any catch up contributions would be in addition to this limit.
- The limit on salary deferrals for 401(k) plans increased from $20,500 to $22,500. The limit on catch up contributions for 401(k) plans, which are available to participants who attain age 50 by the end of the calendar year, increased from $6,500 to $7,500.
What do these increases mean? Basically, opportunities for even higher tax deductible contributions going forward! As 2023 approaches, now is the time to act if you want to set up a qualified plan for a 2022 calendar tax year. If you are interested in exploring the possibility of setting up a qualified plan for your business, please contact us.
You can find a printable version of the complete list of the new 2023 annual limits by visiting the Retirement Plan Limits page of our website.
