ARTICLE | November 03, 2023
2024 retirement plan limits released
The IRS issued Notice 2023-75, which made modifications to the annual limits for retirement plans. These limits are updated annually for cost-of-living adjustments.
IRS releases 2024 retirement plan limitations
2024 limits
Effective Jan. 1, 2024, the following limits apply:
|
|
2024 |
2023 |
2022 |
2021 |
|
401(k), 403(b) and 457 elective deferral limit |
$23,000 |
$22,500 |
$20,500 |
$19,500 |
|
Catch-up contribution limit (age 50 and older) |
$7,500 |
$7,500 |
$6,500 |
$6,500 |
|
Annual compensation limit |
$345,000 |
$330,000 |
$305,000 |
$290,000 |
|
Defined contribution plan limit |
$69,000 |
$66,000 |
$61,000 |
$58,000 |
|
Defined benefit plan limit |
$275,000 |
$265,000 |
$245,000 |
$230,000 |
|
Definition of highly compensated employee |
$155,000 |
$150,000 |
$135,000 |
$130,000 |
|
Key employee |
$220,000 |
$215,000 |
$200,000 |
$185,000 |
|
IRA contribution limit |
$7,000 |
$6,500 |
$6,000 |
$6,000 |
|
IRA catch-up contributions (age 50 and older) |
$1,000 |
$1,000 |
$1,000 |
$1,000 |
|
SIMPLE IRA and SIMPLE 401(k) salary deferral limit |
$16,000 |
$15,500 |
$14,000 |
$13,500 |
|
SIMPLE IRA and SIMPLE 401(k) catch-up limit |
$3,500 |
$3,500 |
$3,000 |
$3,000 |
Income phase-out ranges for various individual retirement account (IRA) purposes increased from between $73,000 and $83,000 to between $77,000 and $87,000 for single and head-of-household taxpayers. Similar incremental changes were made to the limits for married filing jointly and married filing separately taxpayers. For more information, refer to Notice 2023-75.
Considerations
The increases to the 2024 limits are not as large as the increases were to the 2023 limits and reflect a slowdown in inflation. Of the limits shown in the table above, the IRA contribution limit showed the largest percent increase, followed by the annual compensation and defined contribution plan limits. No catch-up contribution limits were adjusted this year.
Impact of SECURE 2.0 on 2024 limits
- The SECURE 2.0 Act (Act) increased the amount that an IRA or defined contribution plan could pay in premiums for a qualified longevity annuity contract to $200,000 for 2023. This limit remains the same for 2024.
- The Act authorized indexing of the catch-up contribution limit for IRAs. Despite this change being effective for 2024, the cost- of- living adjustment procedures did not result in an increase to the IRA catch-up contribution limit.
- Participants in SIMPLE 401(k) and SIMPLE IRA plans can take advantage of an increased deferral limit of $17,600 (i.e., 110% of the $16,000 annual limit) if their employer meets one of the following conditions:
- has 25 or fewer employees receiving at least $5,000 of compensation, or
- has more than 25 but not more than 100 employees and makes either a 4% matching contribution or a 3% nonelective contribution.
The 10% increase in the annual limit also applies to the catch-up deferral limit available to participants who are age 50 or older.
What should you do now?
The limits shown above become effective Jan. 1, 2024. Employers and employees should review these limit changes and consider how they are impacted. Employers sponsoring SIMPLE IRAs or SIMPLE 401(k)s should especially review whether the limit changes going into effect under SECURE 2.0 this upcoming year are applicable to them. Any necessary action to prepare for these limit changes, such as conversations with plan recordkeepers or third-party administrators, should be completed in the near term. Employers are also reminded that retirement plans that run on a fiscal year should be careful in applying these changes, as some limits are always calendar-year limits (e.g., the elective deferral limit), while other limits apply on a plan-year-beginning basis (e.g., the annual compensation limit).
Do you have questions or want to talk?
Call us at (800) 232-9547 or fill out the form below and we’ll contact you to discuss your specific situation.
This article was written by Bill O’Malley, Christy Fillingame, Lauren Sanchez and originally appeared on 2023-11-03.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2023/irs-releases-2024-retirement-plan-limitations.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Insero & Co. CPAs, LLP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how Insero & Co. CPAs can assist you, please call (800) 232-9547.
