IRS Announces Adjusted Plan Limits for 2023

Cooley Alert

The Internal Revenue Service has announced cost-of-living-adjusted limits for 2023 that affect the operation of tax-qualified retirement plans, including 401(k) plans and certain other types of employee benefit plans, such as deferred compensation plans that may be subject to Internal Revenue Code §409A. The amount by which the limits are adjusted each year is based on a cost-of-living index, and not all limits increase every year. For 2023, however, all of the plan-related, cost-of-living-adjusted limits listed below have increased from 2022. In connection with the increased limits for 2023, employers should revise participant communications and election forms, amend plan documents and summary plan descriptions, and update all payroll and/or human resources systems with the new dollar amount limitations.

The Social Security Old-Age, Survivors, and Disability Insurance (OASDI) taxable wage base, which governs the amount of pay subject to Social Security tax withholding and affects plans that are “integrated” with Social Security, also is subject to adjustment annually. For 2023, the OASDI taxable wage base has been increased to $160,200.

Adjusted limits

Provision 2023 limit
Maximum 401(k) contributions $22,500
Maximum compensation limit $330,000
Highly compensated employees
  Earning (in previous year) more than

Key employee compensation limit $215,000
Annual contribution limit for defined contribution plans $66,000
Annual benefit limit for defined benefit plans $265,000
SIMPLE plan limit $15,000
Age 50 and older catch-up contribution limit
All plans other than SIMPLE plans
SIMPLE plans

Annual contribution limit for Section 457 deferred compensation plans (government and tax-exempt organizations) $22,500
Employee stock ownership plan (ESOP)
Maximum account balance subject to five-year distribution period
Each incremental dollar amount in excess of account balance that adds one year to five-year distribution period

Simplified employee pension (SEP) plans
Contributions must be made for employees earning at least

409A minimum specified employee (officer) compensation requirement $215,000
409A involuntary separation pay exception $660,000

If you have questions about the information covered in this alert, please contact a member of your Cooley team or one of the lawyers from the compensation & benefits group listed below.

Related Contacts
Stacey A. Bradford  Special Counsel Washington, DC
Dov Fiskus  Associate New York
Alessandra Murata  Partner Palo Alto
Related Practices & Industries

Compensation & Benefits  Public Companies