IRS Announces Cost-of-Living Adjustments Affecting Retirement Plans for 2022

The Internal Revenue Service announced cost-of-living adjustments affecting certain dollar limitations for pension plans and other retirement-related limitations for 2022 in Notice 2021-61.

 The following chart details 2022 retirement plan dollar limitation cost-of-living adjustments:  

Limitation Description 2021 2022
Maximum annual benefit under a defined benefit plan under IRC Section 415(b)(1)(A)
$230,000
$245,000
Maximum annual contribution to an individual's defined contribution plan account under IRC Section 415(c)
$58,000
(plus catch-up)
$61,000
(plus catch-up)
Elective contribution limit under IRC Section 402(g)(1) (for 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan)
$19,500
$20,500
Maximum amount of annual compensation that may be taken into account for determining benefits or contributions to retirement plans under IRC Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii)
$290,000
$305,000
Dollar amount for determining maximum account balance in an employee stock ownership plan subject to a 5-year distribution period under IRC Section 409(o)(1)(C)(ii) $1,165,000 $1,230,000

Dollar amount used for determining the lengthening of the 5-year distribution period in an employee stock ownership plan under IRC Section 409(o)(1)(C)(ii)

$230,000
$245,000

Amount of compensation to be a "key" employee under a "top-heavy" plan under IRC Section 416(i)(1)(A)(i)

$185,000
$200,000

Dollar limitation used in the definition of "highly compensated employee" under IRC Section 414(q)(1)(B)

$130,000
$135,000
Limitation under IRC Section 408(p)(2)(E) for salary deferral contributions to SIMPLE retirement accounts $13,500 $14,000
Limitation concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan under IRC Section 664(g)(7)

$50,000
$55,000

Wage Base For Social Security Tax

$142,800 $147,000*

*October, 13, 2021 SSA announcement

The following limits remain unadjusted for 2022:

  • The catch-up contribution limit for employees who are age 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan remains unchanged at $6,500.
  • The minimum compensation amount under IRC Section 408(k)(2)(C) for simplified employee pensions (SEPs) remains unchanged at $650.
  • The limit on annual contributions to an IRA remains unchanged at $6,000.
  • The additional catch-up contribution limit to an IRA for individuals age 50 and over remains $1,000.

Please click here for more details on the changes made by IRS Notice 2021-61.