Each year, the IRS releases new retirement plan limits, adjusted for inflation. The annual increase is written into the Internal Revenue Code, allowing the IRS to make the adjustments without the approval of Congress. The IRS recently issued the retirement plan limits for the 2023 year. Commensurate with the recent inflation trends, the 2023 limits include some substantial increases.
For example, the individual deferral limit for 401(k) and 403(b) plans will increase from $20,500 to $22,500. Maximum compensation for purposes of determining annual accruals will rise from $305,000 to $330,000. And the limit for total defined contribution plan annual accruals will increase from $61,000 to $66,000.
Gallagher has prepared a chart walking through the 2023 limits for qualified retirement plans. Plan sponsors should consider taking steps to inform participants about the 2023 adjustments to allow them to take advantage of the increased limits. While most participants aren't impacted by changes to the annual limits, some may want to modify their deferral elections for 2023 based on the new numbers.ACCESS THE CHART