ERISA has established plan limits for contributions and benefits that apply to all qualified retirement plans. The chart below outlines the maximum contribution (or benefit) that can be funded to each type of qualified retirement plan. These limits are indexed annually for inflation.
Limit Type |
2023 |
2022 |
2021 |
|---|---|---|---|
Maximum Employee 401(k) or 403(b) Deferral |
$22,500 |
$20,500 |
$19,500 |
Employee Catch-up Contributions |
$7,500 |
$6,500 |
$6,500 |
Maximum Contribution to Defined Contribution Plan |
$66,000 |
$61,000 |
$58,000 |
Maximum Benefit in a Defined Benefit Limit |
$265,000 |
$245,000 |
$230,000 |
Annual Limit on Compensation |
$330,000 |
$305,000 |
$290,000 |
Highly Compensated Employees |
$150,000 |
$135,000 |
$130,000 |
Social Security Wage Base |
$160,200 |
$147,000 |
$142,800 |
Defined contribution plans, (e.g. profit sharing plans and 401(k) plans) contain limits on the amount of annual contributions that can be funded to the plan. These include both employee and employer limits. In determining contributions, employers must exclude salary above the annual compensation limit as shown in the chart above.
Participants in defined contribution plans are limited on how much can be allocated to their individual retirement accounts.
- Profit Sharing Plans – For 2023, the maximum contribution that can be funded to a participant’s account is 100% of compensation up to $66,000.
- 401(k) Plans – For 2023, a participant can defer 100% of compensation into a 401(k) plan up to $22,500i. Participants age 50 and above are eligible to contribute an additional $7,500, for a total of $30,000. The total contribution for employee deferrals and employer contributions, including forfeitures, is 100% of compensation up to $66,000 ($73,500ii for participants age 50 and above).
The maximum permissible federal income tax deduction for employer contributions funded to a plan is 25% of the aggregate compensation of the eligible participants. Employee salary deferrals are not subject to this limit and can be claimed as an additional tax deduction by the employer.
Please contact JULY at 888.333.5859 for more information.
i Your company may impose more restrictive limitations. Please refer to the adoption Agreement for information specific to your plan.
ii A participant must defer at least $7,500 in order to reach $73,500.
JULY is a 401(k) services company specializing in hi-touch, tech-enabled retirement plan services. Our employees have served as plan experts to advisory firms and employers in the small and micro 401(k) plan market for over 25 years. Over the last decade, JULY has built a host of proprietary technology solutions to streamline, automate and simplify all facets of retirement planning to make processes rewarding and easy for our clients. For more information about JULY, visit our website.