2025 COLAs for retirement plan dollar limits released
Posted by DaveMoll on Nov. 7, 2024 / Subscribe 0
The IRS has released the 2025 cost-of-living adjustments to retirement plan limits. Several pension plan limitations have increased because the increase in the index met the statutory thresholds that trigger their adjustment. However, some of the pension plan limitations will not change for 2025 because the increase in the cost-of-living index did not meet the statutory thresholds.
Employee benefit plans are subject to annually adjusted dollar limitations on benefits, contributions, compensation and other items. Annual benefit limits are generally calculated based on inflation data from the third fiscal quarter of each year. Adjustments in the limits are rounded down and may not take effect until certain minimum dollar amounts are reached.
Increased 2025 plan limits. Highlights of the 2025 maximum dollar limitations that changed from 2024 include the following:
- Annual defined contribution limit: $70,000, up from $69,000 in 2024;
- Elective deferral limit: $23,500, up from $23,000 in 2024;
- Annual defined benefit limit: $280,000, up from $275,000 in 2024;
- Annual compensation limit: $350,000, up from $345,000 in 2024;
- Dollar limit for key employees in a top-heavy plan: $230,000, up from $220,000 in 2024; and
- Highly compensated employee limit: $160,000, up from $155,000 in 2024.
Unchanged 2025 plan limits. Highlights of the 2025 maximum dollar limitations that did not change include the following:
- SEP coverage amount: $750, unchanged from 2024;
- Annual contribution limit for IRAs: $7,000, unchanged from 2024;
- Catch-up contribution limit for 401(k) plans for employees age 50 and over: $7,500, unchanged from 2024; and
- Catch-up contribution limit for SIMPLE 401(k) plans and SIMPLE IRAs for employees age 50 and over: $3,500, unchanged from 2024.
IRAs. The income phase-out range for IRA contributions for single taxpayers covered by a workplace retirement plan in 2025 is $79,000 to $89,000 for singles, up from $77,000 to $87,000 in 2024. For married couples filing jointly in 2025, where the spouse making IRA contributions is covered by a workplace retirement plan, the income phase-out range is $126,000 to $146,000, up from $123,000 to $143,000 in 2024. The income phase-out range for an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered is $236,000 to $246,000, up from $230,000 to $240,000 in 2024. The phase-out range for a married individual filing a separate return who is covered by a workplace retirement plan is not subject to an annual cost-of-living adjustment and remains $0 to $10,000 for 2025.
The income phase-out range for taxpayers making contributions to a Roth IRA in 2025 is $150,000 to $165,000 for singles and heads of household, up from $146,000 to $161,000 in 2024. For married couples filing jointly, the income phase-out range in 2025 is $236,000 to $246,000, up from $230,000 to $240,000 in 2024. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000 for 2025.
IRS Notice 2024-80, I.R.B. 2024-47, November 18, 2023.
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