Retirement Plan Inflation Adjustments

Tom Ochsenschlager, J.D., CPA

 

In Notice 2022-55, the IRS announced the inflation adjustments effective in 2023 for benefits and contributions for retirement plans as follows:

• Section 401(k) plans – Employees can elect to defer as much as $22,500, an increase of $2,000. “Catch-up” contributions for taxpayers 50 years or older will be increased $1,000 (from $6,500 under current law to $7,500).
• Defined contribution plans – The total for employer and employee contributions will be $66,000 (an increase from $61,000 under current law).
• Defined benefit plans – The annual benefit from a defined benefit plan will be increased to $265,000 (up from $245,000).
• Compensation limits – Generally, the annual compensation limit for a retirement plan will be $330,000 (up from $305,000).
• IRAs –
  • The amount of contributions that can be deducted will be increased from $6,000 to $6,500.
  • The additional “catch up” contribution for taxpayers age 50 or over is unchanged and remains at $1,000.
  • For individuals who participate in an employer retirement plan, the deduction for their contribution to an individual IRA is phased out based on their AGI:
    • For singles – AGI between $73,000 and $83,000 (an increase from the 2022 phase-out for AGI between $68,000 and $78,000).
    • For joint filers – AGI between $116,000 and $136,000 (the 2022 phase-out is based on AGI between $109,000 and $129,000).
  • Contributions to a Roth IRA will be limited based on the following range of the taxpayer’s AGI: 
    • For singles – AGI between $138,000 and $153,000 (currently $129,000 and 144,000).
    • For joint returns – AGI between $218,000 and $228,000 (an increase from the current range of $204,000 and $214,000).