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The Internal Revenue Service has announced annual cost-of-living increases to benefit and contribution limits for 2022. These limits, which are described in Notice 2021-61, affect defined benefit pension plans, 401(k) and other defined contribution plans, 403(b) plans and most governmental plans. The IRS also recently issued Revenue Procedure 2021-45, announcing an increase in the maximum amount of contributions to a flexible spending account for 2022.

Notably, the limit on pre-tax elective deferrals to a 401(k), 403(b) or 457(b) plan will increase from $19,500 to $20,500 for 2022; the compensation limit under Code Section 401(a)(17) will increase from $290,000 to $305,000; and the overall limit on annual additions to a defined contribution plan will increase from $58,000 to $61,000.  The annual limit on catch-up contributions to a 401(k) plan by participants age 50 or older will remain at $6,500 for 2022. These 2022 Code limits, along with others, are summarized in the chart below.

Benefit Limit 2022 2021
Elective Deferrals to 401(k)/403(b)/457(b) Plan $20,500 $19,500
Age 50+ Catch-Up Contributions $6,500 $6,500
Defined Benefit Pension $245,000 $230,000
Defined Contribution Contributions $61,000 $58,000
Compensation $305,000 $290,000
Highly Compensated Employee Threshold $135,000 $130,000
Key Employee/Officer $200,000 $185,000

In addition to the retirement plan limits above, the IRS also increased the maximum amount an employee may contribute to a flexible spending account offered as part of a cafeteria plan, from $2,750 to $2,850 for the 2022 plan year. For plans that permit a carryover of unused amounts to the next plan year, the carryover amount for 2022 is $570.

Please contact Slevin & Hart if you have questions on how the updated benefit limits may affect your plan.

This publication is intended to provide general information only, and is not intended to provide legal advice. The distribution of our publications is not intended to create, and receipt of them does not constitute, an attorney-client relationship. Permission is granted to make and redistribute, without charge, copies of this entire document provided that such copies are complete and unaltered and identify Slevin & Hart, P.C. as the author.  All other rights reserved.

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