Cost-of-Living Adjustments (COLAs) for 2023
Each year, the IRS adjusts retirement plan contribution limits and other plan-related thresholds for changes in the cost-of-living index. The current high rate of inflation has triggered updates to all limits for the 2023 plan year. Plan sponsors may want to review 2023 COLAs with payroll staff to ensure that all necessary adjustments are made and to determine whether the new compensation limits will result in a change to the groups of employees classified as HCEs or key employees, which could affect 2023 nondiscrimination testing.
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| Annual compensation limit for calculating contributions | $330,000 | $305,000 | $290,000 |
| 401(k) & 403(b) plan elective deferral limit | $22,500 | $20,500 | $19,500 |
| 457(b) governmental plan elective deferral limit | $22,500 | $20,500 | $19,500 |
| Age 50 catch-up contribution limit | $7,500 | $6,500 | $6,500 |
| Defined contribution plan annual additions limit | $66,000 | $61,000 | $58,000 |
| Highly compensated employee (HCE) threshold | $150,000 | $135,000 | $130,000 |
| Key employee | $215,000 | $200,000 | $185,000 |
| Taxable wage base | $160,200 | $147,000 | $142,800 |
You can find more information on retirement plan COLAs on the IRS’s website.