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.
|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|
|Highly Compensated Employee Threshold||$135,000||$130,000|
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.
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