2025 Will See COLAs for Qualified Retirement Plans Comparable to 2024

Katrina Clingerman
Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
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[co-author: Thomas Gerard]

On November 1, 2024, the 2025 calendar year cost-of-living adjustments (COLAs) to the contribution and compensation limits for tax-qualified retirement plans were released by the Internal Revenue Service (IRS) in Notice 2024-80.

Quick Hits

  • The elective deferral limit for 401(k) and 403(b) plans will increase to $23,500 for 2025, and the catch-up contribution limit will remain at $7,500 for most employees but will rise to $11,250 for employees who achieve ages 60 to 63 in 2025.
  • The limitation on compensation that can be taken into account under tax-qualified retirement plans will increase to $350,000 for 2025.
  • The threshold for determining highly compensated employees will increase to $160,000.

The 2025 adjustments were comparable to those made for 2024. The increases shown below are effective January 1, 2025.

Internal Revenue Code (IRC) or Regulation Section 2025 2024
Annual compensation limit: IRC §§ 401(a)(17) / 404(l) $350,000 $345,000
Elective deferral limit: IRC §§ 402(g)(1) and 457(e)(15) $23,500 $23,000
Catch-up contribution limit: IRC § 414(v)(2)(B)(i) For employees ages 60-63: For other employees: $11,250 $7,500 N/A $7,500
Defined benefit plan limit: IRC § 415(b)(1)(A) $280,000 $275,000
Defined contribution plan limit: IRC § 415(c)(1)(A) $70,000 $66,000
Highly compensated employee threshold: IRC § 414(q)(1)(B) $160,000 $155,000
Employee stock ownership plan (ESOP) limits: IRC § 409(o)(1)(C) $1,415,000 $280,000 $1,380,000 $275,000
Key employee dollar limit in top-heavy plan: IRC § 416(i)(1)(A)(i) $230,000 $220,000
SIMPLE maximum contribution limit: IRC § 408(p)(2)(E) $16,500 $16,000
SIMPLE catch-up contribution limit: IRC § 414(v)(2)(B)(ii) For employees ages 60-63: For all other employees: $5,250 $3,500 $3,500
Simplified employee pension (SEP) minimum compensation: IRC § 408(k)(2)(C) $750 $750
SEP maximum compensation: IRC § 408(k)(3)(C) $350,000 $345,000
Control employee: § 1.61-21(f)(5)(i) $140,000 $135,000
Control employee: § 1.61-21(f)(5)(iii) $285,000 $275,000
Social Security taxable wage base $176,100 $168,600

The IRS makes cost-of-living adjustments annually in response to inflation. Each limit is rounded to a whole number, usually the nearest $500 or $1,000, as prescribed by the Employee Retirement Income Security Act (ERISA).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

© Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

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