Wipfli logo
Insights - Articles, Blogs and on-demand webcasts

Articles & E-Books

 

Employee benefit plan and IRA cost-of-living adjustments: 2022 vs 2023

Oct 25, 2022

The IRS recently announced 2023 cost-of-living adjustments (COLA) limits. In response, Wipfli has created a quick-reference table comparing the COLA applicable to dollar limitations for various qualified retirement plans.

What’s changed?

The 2023 limits reflect increases in the Consumer Price Index for All Urban Consumers (CPI-U) from the third quarter of 2021 to the third quarter of 2022. Using this measure, inflation reached its highest level since indexing began, resulting in 7-11% increases in most plan limits, based on rounding levels. These record hikes come on the heels of 2022’s increases, which were the second highest ever up to that time.

Plan sponsors should verify that their administrative and payroll systems reflect the appropriate limits. Review communications that specify benefit plan limits for accuracy before you give materials to participants.

2022 vs 2023 comparison

2022 2023 Increase
Compensation limit (IRC Sec. 401(a)(17)) $305,000 $330,000 $25,000
Defined benefit plan annual benefit limit $245,000 $265,000 $20,000
Defined contribution plan annual contribution limit $61,000 $66,000 $5,000
Social Security tax wage base $147,000 $160,200 $13,200
Highly compensated employee compensation threshold $135,000 $150,000 $15,000
Key employee officer compensation threshold $200,000 $215,000 $15,000
SEP compensation threshold $650 $750 $100
401(k), 403(b), 457(b) and SARSEPs
     
Elective deferral limit(2) $20,500 $22,500 $2,000
Catch-up contribution(3) $6,500 $7,500 $1,000
SIMPLE Plan
     
Elective deferral limit(2) $14,000 $15,500 $1,500
Catch-up contribution(3) $3,000 $3,500 $500
IRA
     
Contribution limit(2) $6,000 $6,500 $500
Catch-up contribution(3) $1,000 $1,000 -
Traditional IRA Deduction Phaseout Range (AGI)
     
Single, head of household - active participant $68,000/$78,000 $73,000/$83,000 $5,000/$5,000
Married filing separate - any spouse participates $0/$10,000 $0/$10,000 $0/$0
Married filing joint - nonparticipating spouse $204,000/$214,000 $218,000/$228,000 $14,000/$14,000
Married filing joint - participating spouse $109,000/$129,000 $116,000/$136,000 $7,000/$7,000
Roth IRA contribution eligibility phaseout range (AGI)
     
Married filing joint $204,000/$214,000 $218,000/$228,000 $14,000/$14,000
Single, head of household $129,000/$144,000 $138,000/$153,000 $9,000/$9,000
Married filing separate - any spouse participates $0/$10,000 $0/$10,000 $0/$0
Retirement saver's credit limitation (AGI)
     
Married filing joint $68,000 $73,000 $5,000
Head of household $51,000 $54,750 $3,750
Married filing separate, single $34,000 $36,500 $2,500

(1) This table has been updated based on IRS Notice (2022-55), October 21, 2022.
(2) This applies to the total of all elective deferrals an individual makes for the year to 401(k) plans, 403(b) plans, SARSEPs and SIMPLE plans. However, deferrals to each SIMPLE plan in which the individual participates are also limited, as shown later in the table.
(3) Catch-up contributions are available each year to individuals who reach age 50 by December 31.

Contact us for assistance

Wipfli’s employee benefit services practice is dedicated to helping clients meet their employee benefit needs. We’ve been providing qualified and non-qualified plan services for over 30 years.

For more information about the 2023 cost-of-living adjustments, or if you have any questions, please contact your Wipfli relationship executive or benefit specialist.

Sign up to receive additional employee benefit content and information in your inbox, or continue reading on:

Author(s)

Wipfli logo square

Wipfli Editorial Team