On November 1, 2024, the IRS issued Notice 2024-80, which provides certain cost-of-living adjustments for a wide variety of tax-related items, including retirement plan contribution maximums and other limitations, effective January 1, 2025. Several key figures are highlighted below.
The elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan increases from $23,000 to $23,500 in 2025. Additionally, the catch-up contribution limit for employees age 50 and over who participate in any of these plans remains at $7,500, so participants who have reached age 50 will be able to contribute up to $31,000 in 2025. Furthermore, pursuant to SECURE 2.0, the catch-up contribution limit for participants who reach age 60, 61, 62, or 63 in 2025 is $11,250 for 2025 for a total contribution limit of $34,750.
The annual limit for Savings Incentive Match Plan for Employees (SIMPLE) retirement accounts has increased from $16,000 to $16,500. The catch-up contribution limit for employees 50 and over who participate in SIMPLE plans remains $3,500 for 2025. A higher catch-up contribution limit, $5,250 for 2025, applies to SIMPLE plan participants who reach age 60, 61, 62, or 63 in 2025.
The annual limit for defined contribution plans under Section 415(c)(1)(A) increases to $70,000 (from $69,000). The limitation on the annual benefit for a defined benefit plan under Section 415(b)(1)(A) also increases to $280,000 (from $275,000). Additionally, the annual limit on compensation that can be considered for allocations and accruals increases from $345,000 to $350,000.
The threshold for determining who is a highly compensated employee under Section 414(q)(1)(B) increases to $160,000 (from $155,000). The threshold concerning the definition of a key employee in a top-heavy plan increases from $220,000 to $230,000.
Employers should review the notice for additional information. Sponsors of benefits with limits that are changing will need to determine whether their plan documents automatically apply the latest limits or must be amended to recognize the adjusted limits. Any applicable changes in limits should also be communicated to employees.
Notice 2024-80, 2025 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living
PPI Benefit Solutions does not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.
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