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Retirement Plan Contributions Increase for 2023

The Internal Revenue Service (IRS) has announced cost-of-living adjustments for 2023 that affect amounts employees can contribute to retirement plans via Notice 2022-55 which provides technical guidance regarding all the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for the 2023 plan year.

Contribution Increases

Contribution limits for employees who participate in a 401(k), 403(b) or certain 457 plans, as well as the federal government’s Thrift Savings Plan have been increased from $20,500 to $22,500 for 2023. The amount of catch-up contributions for plan participants aged 50 or older increases from $6,500 to $7,500. As a result, in 2023, plan participants that are age 50 and older can contribute up to $30,000.  

Individual Retirement Accounts (IRAs)

The employee contribution limit for IRAs will increase from $6,000 to $7,500. The $1,000 catch-up contribution for IRAs remains unchanged, allowing those age 50 and older to contribute up to $8,500 annually.

SIMPLE Plans

The limitation for SIMPLE retirement accounts is increased from $14,000 to $15,500. The maximum catch-up contribution for an employee who participates in a SIMPLE retirement account plan will increase from $3,000 to $3,500.

Defined Contributions

The limit on total employer-plus-employee contributions to defined contribution plans will increase from $61,000 to $66,000.

Next Steps for Employers

Employers should communicate their plan contribution limits for next year to employees; and while not all plan participants will be able to fund their retirement accounts up to the maximum, employers should encourage those who can defer extra dollars for retirement savings to do so.

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