Today the Internal Revenue Service (IRS) announced the new dollar limits that apply for retirement plans in 2024. These annual limits generally continue to increase (in some cases rather substantially compared to the limits in effect just ten years ago), based on the cost-of-living calculation methodology that is set forth in the Internal Revenue Code. Whether employees will be in a position to reach the higher limits remains to be seen, although the inflation pressures over the past two years will likely make it difficult for many to increase their contributions. However, even a small increase in savings amounts should produce meaningfully larger amounts when someone goes to retire, thanks to the power of investment compounding. Here are the most important annual limit changes for 2024:
- The 401(k) annual limit for elective deferrals (including ROTH contributions) is increasing from $22,500 in 2023 to $23,000 in 2024. [The limit in 2014 was $17,500.]
- T]he limitation on the annual benefit under a defined benefit plan is increasing from $265,000 in 2023 to $275,000 in 2024. [The limit in 2014 was $210,000.]
- The total annual limit for defined contribution plans is increasing from $66,000 in 2023 to $69,000 in 2024. [The limit in 2014 was $52,000.]
- The annual compensation limit is increasing from $330,000 in 2023 to $345,000 in 2024. [The limit in 2014 was $260,000.]
- The compensation amount used in definition of highly compensated employees is increasing from $150,000 in 2023 to $155,000 in 2024. [The limit in 2014 was $115,000.]
- The age-50 catch-up limit for a 401(k) plan is not changing and will stay at $7,500 for 2024. [The limit in 2014 was $5,500.]
If you have any questions about these changes, please don’t hesitate to contact one of Shipman’s employee benefits lawyers.