01 Nov 2022

COLA—or Ginger Ale? 2023 Retirement Plan Limits Announced

 COLA—or Ginger Ale?  2023 Retirement Plan Limits Announced

With IRS announcing the 2023 cost-of-living-adjusted limits that apply to qualified plans, see Notice 2022-55, notably the elective deferral limit rising by 10% (to $22,500), now is a good time for 401(k) plan sponsors to remind participants not only of the new limits, but also the importance both of saving for their retirement and how the limits will affect them. Plans that offer “true-up” provisions (i.e., a provision allowing employees who didn’t get the maximum employer matching contribution due to decreased savings earlier in the year, to increase their plan contributions now to gain lost employer match), can be reminded of that plan provision. It’s also time to provide annual qualified default investment alternative (QDIA) reminders, maybe also reminding employees about any auto-enrollment and auto-escalate features in their savings plans.

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Related Content

  • Cost of Living Adjustments Chart for Employee Benefit Plans
    See how the 401(k) elective deferral limit rose from $20,500 in 2022 to $22,500 in 2023 and catch-up contributions rose from $6,500 to $7,500, allowing total employee contributions for eligible employees aged 50 and above (subject to other limits that may apply) to be as high as $30,000 a year.
  • True-up Clause for 401(k) Plan (Matching Contributions)
    Learn how employees can be provided an opportunity to maximize their employer match by including a true-up provision in the plan. Many 401(k) plans allocate employee plan contributions and employer matching contributions on a per-paycheck formula. Eligible plan participants who experience a change in pay or who saved below the maximum match can benefit from this true-up provision.
  • QDIA Notice
    Remember that plans having a default investment (like target date funds) must provide a QDIA notice to participants (i.e., notice that the plan implements a qualified default investment alternative under 29 C.F.R. § 2550.404c-5(c)(ii)) within a reasonable period of at least 30 days before the new plan year. Now is the time that administrators should be planning this and other end-of-year notifications.
  • Defined Contribution Plan Notices (Periodic Notices)
    Reference this practice note that identifies other notices that defined contribution retirement plan administrators must provide to participants on a periodic basis, for instance, at or near year end.

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