In October, the IRS issued the maximum benefit and contribution limits for 2022. The good news is that most of the dollar limits increased!
| 2022 | 2021 | |
| Elective Deferrals – 401(k) and 403(b) Plans | $20,500 | $19,500 |
| Catch-Up Contributions (over age 50) | $6,500 | $6,500 |
| Annual Contribution Limit – Defined Contribution Plans | $61,000 | $58,000 |
| Annual Covered Compensation Limit | $305,000 | $290,000 |
| Highly Compensated Threshold | $135,000 | $130,000 |
| SIMPLE Contribution Limits | $14,000 | $13,500 |
| SIMPLE Catch-Up Contributions (over age 50) | $3,000 | $3,000 |
| Top Heavy Plan Key Employee Compensation Limit | $200,000 | $185,000 |
| Social Security Taxable Wage Base | $147,000 | $142,800 |
The Annual Covered Compensation Limit is the maximum compensation used when performing the annual compliance testing (non-discrimination testing, the General Test, etc.). The Annual Contribution Limit for Defined Contribution Plans has increased to $61,000. This dollar amount includes a participant’s elective deferrals and all employer contributions (match, safe harbor, and profit-sharing). It does not include the $6,500 Catch-Up Contribution so a participant who is over age 50 may be able to receive annual contributions of up to $67,500!
If you do not currently sponsor a qualified retirement plan or you recently adopted one, remember that start-up plans qualify for tax credits for the expense of the plan. Eligible employers may be able to claim a tax credit of up to $5,000, for three years, for the ordinary and necessary costs of starting a qualified plan. This tax credit reduces the amount of taxes you may owe on a dollar-for-dollar basis.
If you would like more information on the tax credits, sponsoring a qualified plan, or taking advantage of the new limits within an existing qualified plan, give us a call.