By Brett Sinsabaugh, CPA, CCA, Partner
Employer/employee guide to pension, HSA, and other retirement related adjustments
The Internal Revenue Service (IRS) announced cost of living adjustments to contribution limits for individual pension plans and other retirement-related items (Notice 2024-80). These limits become effective January 1, 2025.
Employers and employees should review these limit changes for planning purposes. Employers should be proactive in preparing for these limit changes by talking with plan recordkeepers or third-party administrators, etc. Please be mindful of limitations and timing differences impacting fiscal-year vs. calendar-year plans.
Key retirement plan adjustments 2025 vs 2024
| Plans | 2025 | 2024 |
|---|---|---|
| 401(k), 403(b), and 457 | ||
| -Employee Elective Deferral Limits - 401(k), 403(b) and 457 | $23,500 | $23,000 |
| -Catch-Up Contributions Limit - 401(k), 403(b), and 457 | $7,500 | $7,500 |
| -Defined Contribution Maximum | $70,000 | $69,000 |
| -Defined Benefit Maximum | $280,000 | $275,000 |
| IRAs | ||
| -Contribution Limits | $7,000 | $7,000 |
| Note – Phase-out ranges increase to $150,000-$165,000 for single filers and $236,000-$246,000 for married couples filing jointly. This expansion provides higher-income earners the potential to benefit from the tax-free growth opportunities of Roth IRAs. | ||
| -Catch-Up Contributions Limit – IRAs | $1,000 | $1,000 |
| Executive Compensation Benefit Plan Adjustments | ||
| -Annual Compensation Maximum | $350,000 | $345,000 |
| -Highly Compensated Employee | $160,000 | $155,000 |
| -Key Employee | $230,000 | $220,000 |
| Health Savings Accounts (HSA) | ||
| -Individual | $4,300 | $4,150 |
| -Family | $8,550 | $8,300 |
| -Catch-up Contribution (age 55 and Older) | $1,000 | $1,000 |
Note to employers: For a participant who separated from service before January 1, 2025, the participant’s limitation under a defined benefit plan under section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2024, by 1.0262.
A detailed description of limits and thresholds can be found on the IRS website.
Keiter is focused on keeping you updated on new and changing regulations that may impact you and your business. Questions on this topic? Contact your Keiter Opportunity Advisor | Call: 804.747.0000
Additional resources for employee benefit plan administrators
About the Author
Brett Sinsabaugh, CPA, CCA, Partner
Brett’s client focus is primarily in the real estate and construction industry. He also provides financial statement audit, assurance, and employee benefit plan audit services to privately-held businesses in the manufacturing, retail and distribution, and technology industries, as well as membership organizations and trade associations. Brett is a member of the Firm’s Employee Benefit Plan audit team and Real Estate and Construction industry team.
More Insights from Brett SinsabaughThe information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
