IRS announces 2023 retirement and benefit plan limits, SSA announces COLA adjustment
On October 18, 2022, the Internal Revenue Service (IRS) announced cost-of-living adjustments to the dollar limits on benefits and contributions in retirement plans for 2023. These adjustments are in addition to previously announced increases in limits to other employee benefit plans. In addition, the Social Security Administration recently announced the cost-of-living adjustment to the Social Security wage base for 2023.
The updated limits for 2023, as compared to last year’s limits, are set forth in the charts below:
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Qualified retirement plan contribution limits |
2022 |
2023 |
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Section 401(k) and 403(b) plan elective deferral limit |
$20,500 |
$22,500 |
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Catch-up contribution limit (for participants aged 50 or older) |
$6,500 |
$7,500 |
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Defined contribution plans – annual additions limit |
$61,000 |
$66,000 |
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Section 457 plan elective deferral limit – deferred compensation plans of state and local governments and tax-exempt organizations |
$20,500 |
$22,500 |
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Annual compensation limit |
$305,000 |
$330,000 |
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Other limits |
2022 |
2023 |
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Highly compensated employee threshold (Code Section: 414(q)(1)(B)) |
$135,000 |
$150,000 |
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Key employee compensation threshold (Code Section: 416(i)(1)(A)(i)) |
$200,000 |
$215,000 |
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Defined benefit plans - maximum annual benefit (Code Section: 415(b)(1)(A)) |
$245,000 |
$265,000 |
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SIMPLE plans |
2022 |
2023 |
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Maximum contributions |
$14,000 |
$15,500 |
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Catch-up contributions (for participants aged 50 or older) |
$3,000 |
$3,500 |
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The Social Security Administration announced the cost-of-living adjustment to the Social Security contribution and benefit base (also known as the “taxable wage base”) for 2023.
|
Social Security taxable wage base |
2022 |
2023 |
|
Social Security taxable wage base |
$147,000 |
$160,200 |
Note: Federal Insurance Contributions Act (FICA) tax rates remain unchanged. The Old-Age, Survivors, and Disability Insurance (OASDI) tax of 6.20 percent each for employers and employees (12.4 percent for self-employed individuals) applies to wages up to the Social Security annual taxable wage base. The Medicare tax of 1.45 percent each for employers and employees is not limited to the taxable wage base and applies to all wages. An additional Medicare tax of 0.9 percent for employees only applies to all wages over specified income thresholds based on filing status ($250,000 for married filing jointly, $125,000 for married filing separately; and $200,000 for all other taxpayers).
The health savings account (HSA) and HDHP limits for 2023 are as follows:
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HSA/HDHP limits |
2022 |
2023 |
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Maximum health savings account contribution |
Self: $3,650 Family: $7,300 |
Self: $3,380 Family: $7,750 |
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HSA catch-up contribution (for participants aged 55 or older) |
$1,000 |
$1,000 |
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HDHP minimum annual deductible |
Self: $1,400 Family: $2,800 |
Self: $1,500 Family: $3,000 |
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HDHP maximum out of pocket |
Self: $7,050 Family: $14,100 |
Self: $7,500 Family: $15,000 |
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The flexible spending account limits are as follows:
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Flexible spending account limits |
2022 |
2023 |
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Health FSA |
$2,850 Max. carryover to following plan year: $570 |
Max. carryover to following plan year: $610 |
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Dependent care FSA |
Family: $5,000** Married, filing separately: $2,500 |
Family: $5,000** Married, filing separately: $2,500 |
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| **Married and filing a joint return or single parent filing | ||||||
Expected benefits health reimbursement
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Arrangements (EBHRAs) |
2022 |
2023 |
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EBHRAs |
$1,800 |
$1,950 |
Transit and parking fringe benefits limit
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Transit and parking fringe benefits limit |
2022 |
2023 |
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Transit/parking |
$280/month |
$300/month |
Action items for employers
- Update any plan documents that identify the annual limitations.
- Update participant communications as the limits may impact important benefit elections for 2023.
- Update Human Resource Information Systems (HRIS) and/or payroll systems with new limitations for administration, recordkeeping and tax reporting.
- Ensure all vendor data feeds are updated to comply with the new limits.
For more information, please contact any of the members of our Employee Benefits and Executive Compensation group.
