In October, the IRS issued the maximum benefit and contribution limits for 2022. The good news is that most of the dollar limits increased!
|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.