IRS Announces COLA Adjusted Retirement Plan Limitations for 2022

The Internal Revenue Service today released Notice 2021-61 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2022.

Highlights Affecting Plan Sponsors of Qualified Plans for 2022

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $19,500 to $20,500.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,500.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains is increased from $13,500 to $14,000.
  • The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $230,000 to $245,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased for 2022 from $58,000 to $61,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $290,000 to $305,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $185,000 to $200,000.
  • The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period is increased from $1,165,000 to $1,230,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $230,000 to $245,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $130,000 to $135,000.

The IRS previously updated Health Savings Account limits for 2021. See our post here.

The following chart summarizes various significant benefit Plan limits for 2020 through 2022:

Type of Limitation202220212020
415 Defined Benefit Plans$245,000$230,000$230,000
415 Defined Contribution Plans$61,000$58,000$57,000
Defined Contribution Elective Deferrals$20,500$19,500$19,500
Defined Contribution Catch-Up Deferrals$6,500$6,500$6,500
SIMPLE Employee Deferrals$14,000$13,500$13,500
SIMPLE Catch-Up Deferrals$3,000$3,000$3,000
Annual Compensation Limit$305,000$290,000$285,000
SEP Minimum Compensation$650$650$600
SEP Annual Compensation Limit$305,000$290,000$285,000
Highly Compensated$135,000$130,000$130,000
Key Employee (Officer)$200,000$185,000$185,000
Income Subject To Social Security Tax  (FICA)$147,000$142,800$137,700
Social Security (FICA) Tax For ER & EE (each pays)6.20%6.20%6.20%
Social Security (Med. HI) Tax For ERs & EEs (each pays)1.45%1.45%1.45%
SECA (FICA Portion) for Self-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.90%2.90%2.90%
IRA Contribution$6,000$6,000$6,000
IRA Catch-Up Contribution$1,000$1,000$1,000
HSA Max. Contributions Single/Family Coverage$3,650/ $7,300$3,600/ $7,200$3,550/ $7,100
HSA Catchup Contributions$1,000$1,000$1,000
HSA Min. Annual Deductible Single/Family$1,400/ $2,800$1,400/ $2,800$1,400/ $2,800
HSA Max. Out Of Pocket Single/Family$7,050/ $14,100$7,000/ $14,000$6,900/ $13,800