2025 Will See COLAs for Qualified Retirement Plans Comparable to 2024
On November 1, 2024, the 2025 calendar year cost-of-living adjustments (COLAs) to the contribution and compensation limits for tax-qualified retirement plans were released by the Internal Revenue Service (IRS) in Notice 2024-80.
Quick Hits
- The elective deferral limit for 401(k) and 403(b) plans will increase to $23,500 for 2025, and the catch-up contribution limit will remain at $7,500 for most employees but will rise to $11,250 for employees who achieve ages 60 to 63 in 2025.
- The limitation on compensation that can be taken into account under tax-qualified retirement plans will increase to $350,000 for 2025.
- The threshold for determining highly compensated employees will increase to $160,000.
The 2025 adjustments were comparable to those made for 2024. The increases shown below are effective January 1, 2025.
The IRS makes cost-of-living adjustments annually in response to inflation. Each limit is rounded to a whole number, usually the nearest $500 or $1,000, as prescribed by the Employee Retirement Income Security Act (ERISA).
Ogletree Deakins’ Employee Benefits and Executive Compensation Practice Group regularly provides legal updates in response to developments in employee benefits law. Please see the Employee Benefits and Executive Compensation blog for more information
Source(s): Ogletree Deakins, received on November 15, 2024.