The Internal Revenue Service recently announced its cost-of-living adjustments applicable to dollar limitations on benefits and contributions for retirement plans generally effective for Tax Year 2022 (see IRS Notice 2021-61). Most notably, the limitation on annual salary deferrals into a 401(k) or 403(b) plan will increase from $19,500 to $20,500. The more significant dollar limits for 2022 are as follows:
LIMIT | 2021 | 2022 |
401(k)/403(b) Elective Deferral Limit (IRC § 402(g)) The annual limit on an employee’s elective deferrals to a 401(k) or 403(b) plan made through salary reduction. |
$19,500 | $20,500 |
Government/Tax Exempt Deferral Limit (IRC § 457(e)(15)) The annual limit on an employee’s elective deferrals concerning Section 457 deferred compensation plans of state and local governments and tax-exempt organizations. |
$19,500 | $20,500 |
401(k)/403(b)/457 Catch-up Limit (IRC § 414(v)(2)(B)(i)) In addition to the regular limit on elective deferrals described |
$6,500 | $6,500 |
Defined Contribution Plan Limit (IRC § 415(c)) The limitation for annual contributions to a defined contribution |
$58,000 | $61,000 |
Defined Benefit Plan Limit (IRC § 415(b)) The limitation on the annual benefits from a defined benefit plan. |
$230,000 | $245,000 |
Annual Compensation Limit (IRC § 401(a)(17)) The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing. |
$290,000 ($430,000 for certain gov’t plans) |
$305,000 ($450,000 for certain gov’t plans) |
Highly Compensated Employee Threshold (IRC § 414(q)) The definition of an HCE includes a compensation threshold for |
$130,000 (for 2022 HCE determination) |
$135,000 (for 2023 HCE determination) |
Key Employee Compensation Threshold (IRC § 416) The definition of a key employee includes a compensation threshold. Key employees must be determined for purposes of applying the top-heavy rules. Generally, a plan is top-heavy if the plan benefits of key employees exceed 60% of the aggregate plan benefits of all employees. |
$185,000 | $200,000 |
SEP Minimum Compensation Limit (IRC § 408(k)(2)(C)) The mandatory participation requirements for a simplified |
$650 | $650 |
SIMPLE Employee Contribution (IRC § 408(p)(2)(E)) The limitation on deferrals to a SIMPLE retirement account. |
$13,500 | $14,000 |
SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii))) The maximum amount of catch-up contributions that individuals |
$3,000 | $3,000 |
Social Security Taxable Wage Base See the 2022 SS Changes Fact Sheet. This threshold is the maximum amount of earned income on which Social Security taxes may be imposed (6.20% paid by the employee and 6.20% paid by the employer). |
$142,800 | $147,000 |
Please contact a team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.