IRS Announces COLA Adjusted Retirement Plan Limitations for 2024

The Internal Revenue Service released Notice 2023-75 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2024.

Highlights Affecting Plan Sponsors of Qualified Plans for 2024

  • 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 $22,500 to $23,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $150,000 to $155,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $265,000 to $275,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased from $66,000 to $69,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $330,000 to $345,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $215,000 to $220,000.
  • 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 $1,330,000 to $1,380,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $265,000 to $275,000.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $15,500 to $16,000.
  • The limit on annual contributions to an IRA increased from $6,500 to $7,000. The additional catch-up contribution limit for individuals aged 50 and over is now subject to an annual cost-of-living adjustment, but remains $1,000 for 2024.

The IRS previously updated Health Savings Account limits for 2023. See our post here.

The following chart summarizes various significant benefit Plan limits for 2022 through 2024:

Type of Limitation202420232022
415 Defined Benefit Plans$275,000$265,000$245,000
415 Defined Contribution Plans$69,000$66,000$61,000
Defined Contribution Elective Deferrals$23,000$22,500$20,500
Defined Contribution Catch-Up Deferrals$7,500$7,500$6,500
SIMPLE Employee Deferrals$16,000$15,500$14,000
SIMPLE Catch-Up Deferrals$3,500$3,500$3,000
Annual Compensation Limit$345,000$330,000$305,000
SEP Minimum Compensation$750$650$650
SEP Annual Compensation Limit$345,000$330,000$305,000
Highly Compensated$155,000$150,000$135,000
Key Employee (Officer)$220,000$215,000$200,000
Income Subject To Social Security Tax  (FICA)$168,600$160,200$147,000
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$7,000$6,500$6,000
IRA Catch-Up Contribution$1,000$1,000$1,000
HSA Max. Contributions Single/Family Coverage$4,150/ $8,300$3,850/ $7,750$3,650/ $7,300
HSA Catchup Contributions$1,000$1,000$1,000
HSA Min. Annual Deductible Single/Family$1,600/
$1,500/ $3,000$1,400/ $2,800
HSA Max. Out Of Pocket Single/Family$8,050/
$7,500/ $15,000$7,050/ $14,100

Author: Erwin Kratz

Erwin Kratz practices exclusively in the areas of ERISA and employee benefits law, focusing on tax and regulatory matters relating to qualified and nonqualified deferred compensation and welfare benefits.