In Notice 2023-75, the IRS recently announced the dollar limits and thresholds for qualified retirement plans in 2024, reflecting the latest cost-of-living adjustments. Here are some relevant amounts to be aware of:
Contribution limits for 401(k)s and other defined contribution plans. The annual limit on contributions will increase to $23,000 (up from $22,500) for 401(k), 403(b) and 457 plans, as well as for Salary Reduction Simplified Employee Pension (SARSEP) plans. The annual limits will rise to $16,000 (up from $15,500) for Savings Incentive Match Plans for Employees (SIMPLEs) and SIMPLE IRAs.
Catch-up contributions. The annual limit on catch-up contributions for individuals age 50 or over will remain at $7,500 for 401(k), 403(b) and 457 plans, as well as for SARSEPs. The annual limit for SIMPLEs and SIMPLE IRAs will also remain at $3,500.
Compensation. The annual limit on the maximum compensation that can be taken into account for certain retirement plan contributions and deductions will rise to $345,000 (up from $330,000).
Highly compensated employees. The threshold for determining who’s a highly compensated employee will increase to $155,000 (up from $150,000).
Key employees. The threshold for determining whether an officer is a “key employee” under the top-heavy rules, as well as the cafeteria plan nondiscrimination rules, will rise to $220,000 (up from $215,000).
Annual contributions to defined contribution plans. The limit on annual contributions to these plans, commonly referred to as “pensions,” will increase to $69,000 (up from $66,000).
SEP participation. The threshold for determining participation in a SARSEP or SEP will remain at $750.
Saver’s tax credit. The income limit for determining whether certain individuals are eligible for the saver’s tax credit (also known as the retirement savings contributions credit) will increase to:
- $76,500 (up from $73,000) for taxpayers who are married and filing jointly,
- $57,375 (up from $54,750) for those filing as a head of household, and
- $38,250 (up from $36,500) for all other taxpayers.
“Control” employees. The amounts for determining who’s a control employee, a classification relevant to the valuation of company fringe benefits, will increase to $135,000 (up from $130,000) for officers, and to $275,000 (up from $265,000) for other employees.
Social Security taxable wage base. The annual cost-of-living adjustment to the maximum amount of earnings subject to Social Security tax, which is relevant for various benefit purposes, will rise to $168,600 (up from $160,200). This adjustment was announced in October by the Social Security Administration.
As you can see, most of these amounts have been adjusted upward to account for inflation. If your organization sponsors a qualified plan, be it a defined contribution plan or defined benefit plan, be sure to carefully note the changes. Then, as necessary, review and revise employee benefits communications, plan procedures and administrative forms. We can help you assess the impact of these adjustments.
Contact Berndt CPA or Stelios Payroll today to make sure you are setup for success in 2024!
© 2023
