IRS Publishes 2023 Pension Plan Limitations

The IRS recently announced the cost-of-living adjustments applicable to certain dollar limitations for employee pension benefit plans for 2023. The resulting dollar limits are as follows:

• The annual benefit limit for defined benefit plans is increased from $245,000 to $265,000.
• The annual addition limit for defined contribution plans is increased from $61,000 to $66,000.
• The annual limit with respect to the exclusion for elective deferrals to a 401(k), 403(b) or 457(b) plan is increased from $20,500 to $22,500. The dollar limit for age 50 or over catch-up contributions to a 401(k), 403(b) or government 457(b) plan is increased from $6,500 to $7,500.
• The limit on annual contributions to an individual retirement arrangement (IRA) is increased from $6,000 to $6,500. The dollar limit for age 50 or over catch-up contributions to an IRA remains unchanged at $1,000.
• The limit on annual contributions to SIMPLE plans and SIMPLE IRAs is increased from $14,000 to $15,500. The dollar limit for age 50 or over catch-up contributions to SIMPLE plans and SIMPLE IRAs is increased from $3,000 to $3,500.
• The annual limit on compensation that can be taken into account under a qualified retirement plan is increased from $305,000 to $330,000.
• The dollar limit for defining key employees in a top-heavy plan is increased from $200,000 to $215,000.
• The dollar amount for determining the maximum account balance in an employee stock ownership plan (ESOP) subject to a five-year distribution period is increased from $1.23 million to $1.33 million. The dollar amount used to determine the lengthening of the five-year distribution period is increased from $245,000 to $265,000.
• The limitation used in the definition of "highly compensated employee" is increased from $135,000 to $150,000.

A complete list of applicable pension plan limitations can be found here.

If you have any questions about the cost-of-living adjustments or any other employee benefits or executive compensation matter, please contact a member of Day Pitney's Employee Benefits and Executive Compensation practice group.