November 14, 2024

IRS Releases 2025 Cost-of-Living Adjusted Limits for Benefit Plans

Lisette Sell

Davis Wright Tremaine LLP

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Most limits increase next year for qualified retirement, deferred compensation, and health/welfare plans

The Internal Revenue Service recently announced 2025 dollar limits for qualified retirement plans (including 401(k) plans), deferred compensation plans, and health and welfare plans. Adjustments to certain limits are based on a cost-of-living index.

In addition, the Social Security taxable wage base, which affects qualified retirement plans "integrated" with Social Security, typically adjusts each year. For 2025, the taxable wage base increases to $176,100.

For 2025, most limits increased with the exception of catch-up contribution limits and limits fixed by statute, the latter of which do not adjust based on the cost of living. The increased limits for 2025 are bolded in the tables below.

Qualified Retirement Plan Limits

	2025 Limit	2024 Limit
Annual Limit on 401(k)/403(b) Deferral Contributions	*$23,500*	$23,000
Annual Limit on Age 50 and Older 401(k)/403(b) Catch-up Contributions	$7,500	$7,500
Annual Limit on Age 60-63 401(k)/403(b) Catch-up Contributions	$11,250	(Not in effect prior to 2025)
Annual Compensation Limit	*$350,000*	$345,000
Annual Contribution Limit for Defined Contribution Plans	*$70,000*	$69,000
Annual Benefit Limit for Defined Benefit Plans	*$280,000*	$275,000
Prior Year Compensation Amount for Determining Highly Compensated Employees	*$160,000*	$155,000
Key Employee Compensation Limit	*$230,000*	$220,000
Limit on Pension-Linked Emergency Savings Accounts (PLESAs)	$2,500	$2,500
Annual Limit on SIMPLE Contributions	*$16,500*	$16,000
Annual Limit on Age 50 and Older Catch-up Contributions to SIMPLE Plans	$3,500	$3,500
Annual Limit on age 60-63 Catch-up Contributions to SIMPLE Plans	$5,250	(Not in effect prior to 2025)
ESOP Account Balance Limit Subject to 5-Year Distribution Period	*$1,415,000*	$1,380,000
Incremental Amount Adding Additional Year(s) to ESOP 5-Year Distribution Period	*$285,000*	$275,000
Earnings Threshold for SEP Contribution	$750	$750
Maximum Domestic Abuse Distribution	*$10,300*	$10,000
Maximum Withdrawal for Emergency Expenses	$1,000	$1,000

Deferred Compensation Limits

	2025 Limit	2024 Limit
Annual Limit on 457(b) Contributions	*$23,500*	$23,000
Annual Limit on Catch-up Contributions to 457(b) Plans	$7,500	$7,500
409A Specified Employee Compensation Threshold	*$230,000*	$220,000
409A Involuntary Separation Pay Limit	*$700,000*	$690,000

Health and Welfare Plan Limits

	2025 Limit	2024 Limit
Annual Limit on Salary Reduction Contributions to Health FSA	*$3,300*	$3,200
Annual Limit on Health FSA Carryover	*$660*	$640
Annual Limit on Salary Reduction Contributions to Dependent Care FSA	$5,000 if married filing jointly or if single $2,500 if married filing separately	$5,000 if married filing jointly or if single $2,500 if married filing separately
Annual Limit on HSA Contributions	*$4,300 (EE only)* *$8,550 (family)*	$4,150 (EE only) $8,300 (family)
Annual Limit on Catch-up Contributions to HSA	$1,000	$1,000
Annual Minimum Deductible for High Deductible Health Plans	*$1,650 (EE only)* *$3,300 (family)*	$1,600 (EE only) $3,200 (family)
Annual Limit on High Deductible Health Plan Out-of-pocket Expenses	*$8,300 (EE only)* *$16,600 (family)*	$8,050 (EE only) $16,100 (family)

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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.

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