Employees who want to set aside more money for their 401(k) plans in 2022 should get ready to do so. IRS recently announced many retirement plan increases, putting your year-end prep in high gear.
The 401(k) plan salary deferral limit will head up to $20,500.
The current maximum contribution amount, $19,500, has been in place throughout 2020 and 2021.
How about the salary deferral limit for 403(b) plans and most 457 plans? They’ll also see that $1,000 jump to $20,500.
Meanwhile, employees age 50 or older can opt to make 401(k), 403(b) and 457 retirement plan catch-up contributions of up to $6,500 next year – same as 2021.
IRS announced additional cost-of-living adjustments for 2022, including significant changes in the limit for defined contribution (DC) and defined benefit (DB) plans:
- $61,000 (up from $58,000) for DC plans, and
- $245,000 (currently $230,000) for DB plans.
Also, IRS set the annual compensation limit at $305,000 for 2022. That’s increasing from $290,000.
Other retirement plan numbers you need
Employers that offer SIMPLE retirement accounts should note that elective deferrals will max out once they hit $14,000 in 2022 (bumping up from this year’s $13,500).
The limit on catch-up contributions to SIMPLE plans for individuals age 50 or over won’t budge from $3,000. That’s where it’s sat since 2015.
Also note these changes, found in IRS Notice 2021-61, which you’ll need for some of your nondiscrimination tests:
- limit for a “key employee” in a top-heavy retirement plan under IRC Sec. 416(i)(1)(A)(i) will increase to $200,000 (from $185,000)
- limit for a “highly compensated employee” under IRC Sec. 414(q)(1)(B) will go up to $135,000 (now $130,000)
- compensation amount for a “control employee” for fringe benefit valuation under Income Tax Regs Sec. 1.61-21(f)(5)(i) will rise to $120,000 (currently $115,000), and
- compensation amount under Sec. 1.61-21(f)(5)(iii) will jump up to $245,000 (this year, it’s set at $235,000).