Uniglobal Blog | ERISA, Compliance, and Administration

2025 IRS COLA Limits for 401(k) Plans Released

Written by Uniglobal | Nov 4, 2024 1:42:57 PM

IRS Announces Limits for 2025

On November 1, 2024, the IRS released the upcoming cost of living adjustments (COLA) for various retirement plan limitations that will take effect on January 1, 2025. Full COLA limits are reported by the IRS in IRS Notice 2024-80.

2025 brings increases across the board for many plan-specific dollar limitations, including the 401(k) deferral limit. 

What's Increased for 2025?

  • Salary Deferral contribution limit has increased to $23,500.
    • This limit covers 401(k), 403(b), and 457(b) plans. It applies to plans offering Pre-Tax Elective Deferrals and/or Roth Elective Deferrals. A plan that provides for both still caps the total employee contributions (pre-tax, Roth, or a combination of the two) at this limit.
  • The maximum defined contribution limit for an individual (the annual additions limit) has increased to $70,000.
    • This is the total amount any one individual can have contributed by or for themselves, It includes salary deferrals of $23,500 plus any employer contributions, collectively not exceeding $70,000. It is exclusive of age 50 catch-up amounts.
  • The annual compensation limit (the maximum that is considered for qualified plans) has increased to $350,000.
    • Compensation is used for many plan purposes, including, but not limited to, employer allocation preparation and nondiscrimination testing.
  • The Social Security Taxable Wage Base is now $176,100 per the SSA release.
    • For retirement plans that use an Integrated profit sharing formula, for example, should know that this limit has also increased.
  • The dollar compensation limit under section 416(i)(1)(A)(i) for “key employee” in a top-heavy plan has increased from $220,000 to $230,000.
  • The compensation limit used in the definition of a “highly compensated employee” (HCE) under 414(q)(1)(B) has increased from $155,000 to $160,000.

What's Not Increased?

  • The 414(v)(2)(B)(i) dollar limitation for catch-up contributions to an applicable employer plan other than a plan described in section 401(k)(11) or section 408(p) remains $7,500.
    • Catch-up in this instance refers to the salary deferral contributions of a plan participant turning 50, or who is over age 50, in 2024.
  • The 219(b)(5)(B) IRA Catch-Up Contributions remains at $1,000.
  • The 414(v)(2)(B)(ii) dollar limitation for catch-up contributions to an applicable employer plan described in section 401(k)(11) or section 408(p) for individuals aged 50 or over remains $3,500.

Upcoming and Listed Limits enacted under SECURE 

  • January 1, 2025: Age 60-63 Catch-Up Contributions
    • Starting in 2025, individuals of ages 60 to 63 will have increased catch-up contribution limits; capped at the greater of $10,000, or 50% more than the regular catch-up amount for the year.
    • The catch-up contribution maximum for employees age 50+ is $7,500 for 2025 ($3,500 for SIMPLE plans) and adjusted for inflation annually.
    • The limitation under section 414(v)(2)(E)(i) for catch-up contributions to an applicable employer plan other than a plan described in section 401(k)(11) or section 408(p) that applies for individuals who attain age 60, 61, 62, or 63 in 2025 is $11,250.
  • January 1, 2026: Catch-Up Contribution as designated Roth Contributions
    • Plan Participants that have prior year FICA wages from the employer of $145,000 or higher, (as will be adjusted in the future for inflation) and contribute catch-up contributions to a qualified retirement plan, are required to be ROTH Contributions, even if regular contributions are pre-tax. Review our SECURE Act page for more information here. 

2025 IRS Select COLA Limits Summary Chart (full version)

Plan Section Limit 2025 2024 2023
Maximum Defined Contribution Annual Additions $70,000 $69,000 $66,000
Salary Deferral 401(k)/403(b) Limit $23,500 $23,000 $22,500
Catch-Up Limit (Age 50 or Over) $7,500 $7,500 $7,500
Maximum Compensation for Retirement Plan Purposes $350,000 $345,000 $330,000
HCE Compensation Limit $155,000 $150,000 $150,000
Key Employee Officer $220,000 $220,000 $215,000
Social Security Taxable Wage Base $176,100 $168,600 $160,200

Check out our full Contribution Limit page for all the COLA limits plus historical limits. 

More Information on 2025 COLA Limit Increases

Learn more about these increases and how they impact your retirement plan by contacting Uniglobal and your Uniglobal consultant.

Additional information on limit changes for 2025 can be found in the IRS Retirement Topics page. The IRS page 401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000 expands on the highlights in this post. The IRS also provides a tool if you’d like to get a Retirement Savings Check-Up.
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