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 2024 (see IRS Notice 2023-75). Most notably, the limitation on annual salary deferrals into a 401(k) or 403(b) plan will increase to $23,000, and the dollar threshold for highly compensated employees will increase to $155,000. The more significant dollar limits for 2024 are as follows:
|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.||$22,500||$23,000|
|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.||$22,500||$23,000|
|401(k)/403(b)/457 Catch-up Limit (IRC § 414(v)(2)(B)(i)) In addition to the regular limit on elective deferrals described|
above, employees over the age of 50 generally can make an additional “catch-up” contribution not to exceed this limit.
|Highly Compensated Employee (“HCEs”) (SECURE 2.0 Sec. 603 – IRC § 414(v)(7)) Catch-up contributions for HCEs earning above this limit in FICA wages for the preceding year MUST be ROTH contributions. Not Required for Plan Years beginning in 2024||$66,000||$69,000|
|Defined Benefit Plan Limit (IRC § 415(b)) The limitation on the annual benefits from a defined benefit plan.||$265,000||$275,000|
|Annual Compensation Limit (IRC § 401(a)(17)) The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing.||$330,000 ($490,000 for certain gov’t plans)||$345,000 ($505,00 for certain gov’t plans)|
|Highly Compensated Employee Threshold (IRC § 414(q)) The definition of an HCE includes a compensation threshold for the prior year. A retirement plan’s discrimination testing is based on coverage and benefits for HCEs.||$150,000 (for 2024 HCE determination)||$155,000 (for 2025 HCE determination)|
|Highly Compensated Employee (“HCEs”) (SECURE 2.0 Sec. 603 – IRC § 414(v)(7)) Catch up contributions for HCEs earning above this limit in FICA wages for the preceding year MUST be ROTH contributions. Not Required for Plan Years beginning in 2024||$145,000|
|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.||$215,000||$220,000|
|SEP Minimum Compensation Limit (IRC § 408(k)(2)(C)) The mandatory participation requirements for a simplified|
employee pension (SEP) includes this minimum compensation threshold.
|SIMPLE Employee Contribution (IRC § 408(p)(2)(E)) The limitation on deferrals to a SIMPLE retirement account.||$15,500||$16,000|
|SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii))) The maximum amount of catch-up contributions that individuals|
age 50 or over may make to a SIMPLE retirement account or SIMPLE 401(k) plan.
|Social Security Taxable Wage Base See the 2024 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).||$160,200||$168,600|
Please contact a team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.