IRS Releases 2023 Cost of Living Adjustments for Benefit Plans

The Internal Revenue Service (IRS) has released its annual cost-of-living adjustments applicable to employee benefit plans for 2023. A year-to-year comparison of limitations can be found here: 2023 Annual Limitations Chart

These contribution limits are generally adjusted for inflation and, consistent with prior years, the IRS has increased the limits based on a cost-of-living index. For 2023, the adjustments to qualified retirement plan limitations include an increase in the contribution limit (section 415 limitation) for defined contribution plans from $61,000 to $66,000, and an increase to the annual compensation limit for purposes of Internal Revenue Code Section 401(a)(17) from $305,000 to $330,000 (from $450,000 to $490,000 for certain governmental plans).

In addition, the limits for the amount of elective deferrals (401(k) contributions) and catch up contributions that can be made to defined contribution plans have each been increased. The limit for elective deferrals was increased from $20,500 to $22,500 and, after remaining unchanged for the past few years, the limit for catch-up contributions was increased from $6,500 to $7,500.

The IRS increased the maximum annual contribution to a health savings account from $3,650 to $3,850 for single filers, and from $7,300 to $7,750 for families.

The Social Security wage base increased from $147,000 to $160,200, a more substantial increase than in recent years.

The post IRS Releases 2023 Cost of Living Adjustments for Benefit Plans appeared first on Benefits & Compensation Blog.