IRS Announces COLA Adjusted Retirement Plan Limitations for 2025
The Internal Revenue Service released Notice 2024-80 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2025.
Highlights Affecting Plan Sponsors of Qualified Plans for 2025
- The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $23,000 to $23,500.
- The catch-up contribution limit for individuals aged 50 or over remains at $7,500.
- The new special catch-up contribution limit for individuals who attain age 60, 61, 62, or 63 in 2025 is $11,250.
- The Roth catch-up wage threshold for 2024, which is used to determine whether an individual’s catch-up contributions for 2025 must be designated Roth contributions, remains $145,000.
- The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $345,000 to $350,000.
- The limitation on annual additions to defined contribution plans under Section 415(c)(1)(A) is increased from $69,000 to $70,000.
- The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $275,000 to $280,000.
- The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $155,000 to $160,000.
- The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $220,000 to $230,000.
- The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $16,000 to $16,500.
- The limit on annual contributions to an IRA remains at $7,000. The additional catch-up contribution limit for individuals aged 50 and over remains at $1,000.
The IRS previously updated Health Savings Account limits for 2025. The following chart summarizes various significant benefit Plan limits for 2023 through 2025:
| Type of Limitation | 2025 | 2024 | 2023 |
| 415 Defined Benefit Plans | $280,000 | $275,000 | $265,000 |
| 415 Defined Contribution Plans | $70,000 | $69,000 | $66,000 |
| Defined Contribution Elective Deferrals | $23,500 | $23,000 | $22,500 |
| Defined Contribution Catch-Up Deferrals | $7,500 ($11,250 for age 60-63) | $7,500 | $7,500 |
| SIMPLE Employee Deferrals | $16,500 | $16,000 | $15,500 |
| SIMPLE Catch-Up Deferrals | $3,500 ($5,250 for age 60-63) | $3,500 | $3,500 |
| Annual Compensation Limit | $350,000 | $345,000 | $330,000 |
| SEP Minimum Compensation | $750 | $750 | $750 |
| SEP Annual Compensation Limit | $350,000 | $345,000 | $330,000 |
| Highly Compensated | $160,000 | $155,000 | $150,000 |
| Key Employee (Officer) | $230,000 | $220,000 | $215,000 |
| Income Subject To Social Security Tax (FICA) | $176,100 | $168,600 | $160,200 |
| Social Security (FICA) Tax For ER & EE (each pays) | 6.20% | 6.20% | 6.20% |
| Social Security (Med. HI) Tax For ERs & EEs (each pays) | 1.45% | 1.45% | 1.45% |
| SECA (FICA Portion) for Self-Employed | 12.40% | 12.40% | 12.40% |
| SECA (Med. HI Portion) For Self-Employed | 2.90% | 2.90% | 2.90% |
| IRA Contribution | $7,000 | $7,000 | $6,500 |
| IRA Catch-Up Contribution | $1,000 | $1,000 | $1,000 |
| HSA Max. Contributions Single/Family Coverage | $4,300/ $8,550 | $4,150/ $8,300 | $3,850/ $7,750 |
| HSA Catchup Contributions (age 55) | $1,000 | $1,000 | $1,000 |
| HSA Min. Annual Deductible Single/Family | $1,650/ $3,300 | $1,600/ $3,200 | $1,500/ $3,000 |
| HSA Max. Out Of Pocket Single/Family | $8,300/ $16,600 | $8,050/ $16,100 | $7,500/ $15,000 |