IRS Releases 2023 COLA Limits for 401(k) Plans

IRS Announces Much Higher Limits for 2023

The IRS released the cost of living adjustments (COLA) for various retirement plan limitations that will take effect on January 1, 2023. Full COLA limits are charted by the IRS in their Cost-of-Living Adjustments for Retirement Items.

2023 welcomes several significant increases. On average, the limits that have increased, which are all but one, we see a 10% increase from the year prior. 

What's Increased for COLA 2023?

  • Salary Deferral contribution limit has increased to $22,500.
    • 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.
  • Catch-up contributions have also increased from $6,500 to $7,500.
    • Catch-up in this instance refers to the salary deferral contributions of plan participant turning 50 or who are over age 50 in 2022.
  • The maximum defined contribution limit for an individual (the annual additions limit) has increased to $66,000.
    • This is the total amount any one individual can have contributed by or for themselves, It includes salary deferrals of $22,500 plus any employer contributions, collectively not exceeding $66,000. It is exclusive of age 50 catch-up amounts.
  • The annual compensation limit (the maximum that is considered for qualified plans) has increased to $330,000.
    • 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 $160,200.
    • 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 $200,000 to $215,000.
  • The compensation limit used in the definition of a “highly compensated employee” (HCE) under 414(q)(1)(B) has increased from $135,000 to $150,000.

What's Not Increased?

  • The only limit that has not increased for 2023 is the 219(b)(5)(B) IRA Catch-Up Contributions. The limit remains at $1,000.

2023 IRS Select COLA Limits Summary Chart

Plan Section Limit 2023 2022 2021
Maximum Defined Contribution Annual Additions $66,000 $61,000 $58,000
Salary Deferral 401(k)/403(b) Limit $22,500 $20,500 $19,500
Catch-Up Limit $7,500 $6,500 $6,500
Maximum Compensation for Retirement Plan Purposes $330,000 $305,000 $290,000
HCE Compensation Limit $150,000 $135,000 $130,000
Key Employee Officer $215,000 $200,000 $185,000
Social Security Taxable Wage Base $160,200 $147,000 $142,500

More Information on 2023 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 2023 can be found in the IRS Retirement Topics page. The IRS page 401(k) limit increases to $22,500 expands on the highlights in this post. The IRS also provides a tool if you’d like to get a Retirement Savings Check-Up.