On November 1, 2024, the IRS announced the Cost of Living Adjustments (COLAs) affecting the dollar limitations for retirement plans for 2025.

In October, the Social Security Administration announced a modest benefit increase of 2.5%. Retirement plan limits also increased over the 2024 limits. COLA increases are intended to allow participant contributions and benefits to keep up with the “cost of living” from year to year. Here are the highlights from the new 2025 limits:

• The calendar year elective deferral limit increased from $23,000 to $23,500.
• The elective deferral catch-up contribution remains $7,500. This contribution is available to all participants aged 50 or older in 2025. An additional $3,750 is available in 2025 for participants aged 60-63 (*as long as a plan has chosen to adopt the new provision).
• The maximum available dollar amount that can be contributed to a participant’s retirement account in a defined contribution plan increased from $69,000 to $70,000. The limit includes both employee and employer contributions as well as any allocated forfeitures. For those over age 50, the annual addition limit increases to include catch-up contributions.
• The maximum amount of compensation that can be considered in retirement plan compliance has been raised from $345,000 to $350,000.
• Annual income subject to Social Security taxation has increased from $168,600 to $176,100.
• IRA contribution limits and the catch-up contribution (age > 50) remained the same.

We encourage you to review the updated figures here: https://bfsg.com/retirement-plan-ira-limits/

Prepared by Pension Pro. Edited by BFSG. Copyright 2024.

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