2023 Pension COLAs Announced

401(k), 403(b), 457(b) Pre-Tax Contribution Limit Increases to $22,500 for 2023
The IRS has announced the cost-of-living adjustments (COLAs) to the dollar limits on benefits and contributions under qualified retirement plans, as well as other items, for tax year 2023 [Notice 2022-55, 10-21-22].

IRC §415, which provides for dollar limits on benefits and contributions under qualified retirement plans, requires that the IRS annually adjust these limits for cost-of-living changes. The IRC also requires various other amounts to be adjusted at the same time and in the same manner as these dollar limits.

• The limitation on the exclusion for elective deferrals under §402(g)(1) (e.g., §401(k) and §403(b) plans) increases to $22,500 (from $20,500).
• The limit on annual additions to defined contribution plans under §415(c)(1)(A) increases to $66,000 (from $61,000).
• The limit on the annual benefit under a defined benefit plan contained in §415(b)(1)(A) increases to $265,000 (from $245,000).
• The annual compensation limit under §401(a)(17), §404(l), §408(k)(3)(C), and §408(k)(6)(D)(ii) increases to $330,000 (from $305,000).
• The compensation amount under §408(p)(2)(E) regarding elective deferrals to SIMPLE retirement accounts increases to $15,500 (from $14,000).
• The limitation under §457(e)(15) concerning elective deferrals to deferred compensation plans of state and local governments and tax-exempt organizations (§457(b) plans) increases to $22,500 (from $20,500).
• The limitation under §416(i)(1)(A)(i) concerning the definition of "key employee" in a top-heavy plan increases to $215,000 (from $200,000).
• The limitation under §414(v)(2)(B)(i) for catch-up contributions to §§401(k), 403(b), and 457(b) plans for individuals age 50 or over increases to $7,500 (from $6,500); the limitation under §414(v)(2)(B)(ii) for catch-up contributions to an employer's SIMPLE plan for individuals age 50 or over increases to $3,500 (from $3,000).
• The limitation used in the definition of "highly compensated employee" under §414(q)(1)(B) increases to $150,000 (from $135,000).
• The annual compensation limit under §401(a)(17) for eligible participants in certain government plans that, under the plan as in effect on July 1, 1993, allowed cost-of-living adjustments to the compensation limit under the plan under §401(a)(17) to be taken into account, increases to $490,000 (from $450,000).
• The compensation amount under §408(k)(2)(C) regarding simplified employee pensions (SEPs) increases to $750 (from $650).
• The compensation amount under Treas. Reg. §1.61-21(f)(5)(i), concerning the definition of "control employee" for fringe benefit valuation purposes, increases to $130,000 (from $120,000). The compensation amount under §1.61-21(f)(5)(iii) increases to $265,000 (from $245,000).
• The limit on annual contributions to an Individual Retirement Arrangement, increases to $6,500 (from $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.