The Internal Revenue Service has announced cost-of-living-adjusted limits for 2022 that affect the operation of tax-qualified retirement plans, including 401(k) plans, and certain other types of employee benefit plans, including deferred compensation plans that may be subject to Internal Revenue Code §409A. The amount by which the limits are adjusted each year is based on a cost-of-living index. Not all limits increase every year. In connection with the increased limits for 2022, employers should revise participant communications and election forms, amend plan documents and summary plan descriptions, and update all payroll and/or human resource systems with the new dollar amount limitations.
The Social Security (OASDI) taxable wage base, which governs the amount of pay subject to Social Security tax withholding and affects plans that are "integrated" with Social Security, also is subject to adjustment annually. For 2022, the OASDI taxable wage base has been increased to $147,000.
Adjusted LimitsLimits increased from 2021 in red |
|
| Provision | 2022 Limit |
| Maximum 401(k) Contributions | $20,500 |
| Maximum Compensation Limit | $305,000 |
| Highly Compensated Employees Earning (in previous year) more than
|
$135,000 |
| Key Employee Compensation Limit | $200,000 |
| Annual Contribution Limit for Defined Contribution Plans | $61,000 |
| Annual Benefit Limit for Defined Benefit Plans | $245,000 |
| SIMPLE Plan Limit | $14,000 |
Adjusted LimitsLimits increased from 2021 in red |
|
| Provision | 2022 Limit |
| Age 50 and Older Catch-Up Contribution Limit All plans other than SIMPLE Plans
SIMPLE Plans |
$6,500 $3,000 |
| Annual Contribution Limit for Section 457 Deferred Compensation Plans (government and tax-exempt organizations) | $20,500 |
| Employee Stock Ownership Plan (ESOP) Maximum account balance subject to five-year distribution
period
Each incremental dollar amount in excess of account balance that adds one year to five-year distribution period |
$1,230,000 $245,000 |
| Simplified Employee Pension (SEP)Plans Contributions must be made for employees earning at
least
|
$650 |
| 409A Minimum Specified Employee (Officer) Compensation Requirement | $200,000 |
| 409A Involuntary Separation Pay Exception | $610,000 |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
