IRS Announces Retirement Plan Limits for 2023

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.

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