On Nov. 1, 2024, the Internal Revenue Service (IRS) announced via Notice 2024-80, the cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2025.
The details:
A summary of the 2025 pension limitations as compared to 2024 is below:
|
Plan Maximum Contribution Limits
|
2024
|
2025
|
|
Section 401(k) Plan or SAR SEP
|
$23,000
|
$23,500
|
|
Section 403(b) Plan
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$23,000
|
$23,500
|
|
Section 408(p)(2)(E) SIMPLE Plan Contributions
|
$16,000
|
$16,500
|
|
Section 457(e)(15) Limit
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$23,000
|
$23,500
|
|
Section 415 Limit for:
Defined Contribution Plans
Defined Benefit Plans
|
$69,000
$275,000
|
$70,000
$280,000
|
|
Highly Compensated Employees Section 414(q)(1)(B)
|
$155,000
|
$160,000
|
|
Key Employee Section 416(i)(1)(A)(i)
|
$220,000
|
$230,000
|
|
Includible Compensation –
Section 401(a)(17)
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SEP Compensation
SEP Earnings Threshold
|
$345,000
$345,000
$750
|
$350,000
$350,000
$750
|
|
Limited Governmental Plans (pre 7/1/93)
|
$505,000
|
$520,000
|
|
Section 409 Employee Stock Ownership Plan Subject to 5-Year Distribution Period
Maximum Balance
Amount Used to Determine the Lengthening of the 5-Year Period
|
$1,380,000
$275,000
|
$1,415,000
$280,000
|
For 2025, the limitation under section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in section 401(k)(11) or section 408(p) that generally applies to individuals aged 50 or over remains $7,500. The limitation under section 414(v)(2)(E)(i) for catch-up contributions to an applicable employer plan other than a plan described in section 401(k)(11) or section 408(p) that applies to individuals who attain age 60, 61, 62, or 63 in 2025 is $11,250. For 2026, all catch-up contributions under section 414(v)(7)(A) to an applicable employer plan (other than a plan described in section 408(k) or (p)) must be designated as Roth contributions for individuals earning $145,000 and over in 2025.
The 2025 limit on annual contributions to an IRA remains $7,000. The IRA catch‑up contribution limit for individuals aged 50 remains $1,000.
The 2025 limitation under section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in section 401(k)(11) or section 408(p) that generally applies to individuals aged 50 or over remains $3,500. The limitation under section 414(v)(2)(E)(ii) for catch-up contributions to an applicable employer plan described in section 401(k)(11) or section 408(p) that applies to individuals who attain age 60, 61, 62, or 63 in 2025 is $5,250. The limitation under section 414(v)(2)(B)(iii) for catch-up contributions to certain accounts or plans described in section 401(k)(11) or section 408(p) that generally applies to individuals aged 50 or over remains $3,850.
Next steps
· Retirement plan limits managed by ADP, including the ADP TotalSource 401(k) Retirement Savings Plan and offers from ADP Retirement Services will be updated automatically to match the 2025 limits. No further action is needed.
· You must update retirement plans managed and limited at the individual employee-level, including individual retirement arrangements (IRAs) in the payroll system.