November 2, 2023

2024 Cost of Living Adjustments for Retirement Plans

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The Internal Revenue Service recently announced its cost-of-living adjustments applicable to dollar limitations on benefits and contributions for retirement plans generally effective for Tax Year 2024 (see IRS Notice 2023-75). Most notably, the limitation on annual salary deferrals into a 401(k) or 403(b) plan will increase to $23,000, and the dollar threshold for highly compensated employees will increase to $155,000. The more significant dollar limits for 2024 are as follows:

LIMIT	2023	2024
401(k)/403(b) Elective Deferral Limit (IRC § 402(g)) The annual limit on an employee’s elective deferrals to a 401(k) or 403(b) plan made through salary reduction.	$22,500	$23,000
Government/Tax Exempt Deferral Limit (IRC § 457(e)(15)) The annual limit on an employee’s elective deferrals concerning Section 457 deferred compensation plans of state and local governments and tax-exempt organizations.	$22,500	$23,000
401(k)/403(b)/457 Catch-up Limit (IRC § 414(v)(2)(B)(i)) In addition to the regular limit on elective deferrals described above, employees over the age of 50 generally can make an additional “catch-up” contribution not to exceed this limit.	$7,500	$7,500
Highly Compensated Employee (“HCEs”) (SECURE 2.0 Sec. 603 – IRC § 414(v)(7)) Catch-up contributions for HCEs earning above this limit in FICA wages for the preceding year MUST be ROTH contributions. Not Required for Plan Years beginning in 2024	$66,000	$69,000
Defined Benefit Plan Limit (IRC § 415(b)) The limitation on the annual benefits from a defined benefit plan.	$265,000	$275,000
Annual Compensation Limit (IRC § 401(a)(17)) The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing.	$330,000 ($490,000 for certain gov’t plans)	$345,000 ($505,00 for certain gov’t plans)
Highly Compensated Employee Threshold (IRC § 414(q)) The definition of an HCE includes a compensation threshold for the prior year. A retirement plan’s discrimination testing is based on coverage and benefits for HCEs.	$150,000 (for 2024 HCE determination)	$155,000 (for 2025 HCE determination)
Highly Compensated Employee (“HCEs”) (SECURE 2.0 Sec. 603 – IRC § 414(v)(7)) Catch up contributions for HCEs earning above this limit in FICA wages for the preceding year MUST be ROTH contributions. Not Required for Plan Years beginning in 2024		$145,000
Key Employee Compensation Threshold (IRC § 416) The definition of a key employee includes a compensation threshold. Key employees must be determined for purposes of applying the top-heavy rules. Generally, a plan is top-heavy if the plan benefits of key employees exceed 60% of the aggregate plan benefits of all employees.	$215,000	$220,000
SEP Minimum Compensation Limit (IRC § 408(k)(2)(C)) The mandatory participation requirements for a simplified employee pension (SEP) includes this minimum compensation threshold.	$750	$750
SIMPLE Employee Contribution (IRC § 408(p)(2)(E)) The limitation on deferrals to a SIMPLE retirement account.	$15,500	$16,000
SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii))) The maximum amount of catch-up contributions that individuals age 50 or over may make to a SIMPLE retirement account or SIMPLE 401(k) plan.	$3,500	$3,500
Social Security Taxable Wage Base See the 2024 SS Changes Fact Sheet. This threshold is the maximum amount of earned income on which Social Security taxes may be imposed (6.20% paid by the employee and 6.20% paid by the employer).	$160,200	$168,600

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