2023 Retirement Plan Limits Announced

With the IRS announcing the 2023 cost-of-living-adjusted limits that apply to qualified plans in Notice 2022-55, notably, the new 401(k) elective deferral limit rising 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 of the importance of saving for their retirement and how the limits will affect them. Plans that offer “true-up” provisions, that is, a plan provision allowing employees who didn’t get the maximum employer matching contribution to contribute more now, and remedy that loss,  can be reminded to increase their plan contributions at year end to optimize their savings.

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  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.

Legal Developments

• Retirement Plan Sponsors Have Short 2022 Year-End Amendment List
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• LB&I Memo Providing Updated Guidance on the Statute of Limitations on Section 965 Examinations
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• KPMG Report: Student Loan Forgiveness and State Reporting
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• Tax Key Legal Developments Tracker (Federal)
  Stay informed on new developments: 
  • Employee Benefits. Treasury and IRS issue final regulations under I.R.C. Section 36B that amend regulations regarding eligibility for the Affordable Care Act’s premium tax credit to provide that affordability of employer-sponsored minimum essential coverage (employer coverage) for family members of an employee is determined based on the employee's share of the cost of covering the employee and those family members, not the cost of employee-only coverage. T.D. 9968, 87 Fed. Reg. 61,979 (Oct. 13, 2022).
  • Payroll. Social Security Administration announces an 8.7% cost of living adjustment beginning in 2023. Based on that increase, the maximum amount of earnings (wages) subject to the Social Security tax (taxable maximum) will increase in 2023 to $160,200 from $147,000. SSA Press Release.
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