The Numbers Are In! IRS Updates Plan Limits for 2025. Will You Be in Compliance?

The IRS announced recently the 2025 limits that apply to qualified retirement plans and IRA contributions. The new annual elective deferral limit under IRC Section 402(g) that applies for 401(k) and 403(b) plans rises by just $500, to $23,500. Catch-up contributions remain at $7,500, except for those who first attain ages 60, 61, 62, or 63 in 2025. There, under SECURE 2.0 Act changes, the catch-up limit for 2025 (if the plan permits) is $11,250.

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• 401(k) Plans: Understanding the Rules
  Review the popularity of 401(k) plans and other plans with qualified cash or deferred arrangements. As of December 31, 2022, there were approximately 92.6 million active participants in 401(k) and other defined contribution plans (single-employer and multi-employer) holding an estimated $8.1 trillion in assets and representing nearly 70% of the $11.0 trillion in assets within the U.S. pension plan market.
• 2025 Plan Year Limits (Employee Letter)
  Communicate to eligible employees the new limits that apply for the upcoming plan year.  Many open enrollment periods for health and welfare plans fail to include information about plan contributions because they can be made 24/7 using a web portal. Use the occasion to remind employees to save or integrate the communication with the required annual QDIA notice.

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.    

• Employee Benefits & Executive Compensation Key Legal Developments Tracker (Current)
  Stay informed on new developments.
  • Retirement Plans. S. Government accountability Office issues Reported Impacts of Fee Disclosure Regulations, and DOL Efforts to Support Implementation of Regulations.
  • Retirement Plans. S. Supreme Court has scheduled a January 2025 oral argument in an appeal from Cornell University employees and retirement plan participants claiming fiduciary breach in their retirement plan’s asset management.Cunningham v. Cornell Univ., 86 F.4th 961 (2d Cir. 2023); Cunningham v. Cornell Univ., No. 23-1007, 2024 U.S. LEXIS 3061 (Oct. 4, 2024)
  • Health and Welfare Plans. IRS adjusts health FSA, qualified commuter expenses, and other (primarily) non-benefit plan limits for 2025. Proc. 2024-40.
  • Health and Welfare Plans. IRS, Treasury, DOL, EBSA, HHS, and CMS propose regulations that would provide that medical management techniques used by non-grandfathered group health plans and health insurance issuers offering preventive services would not be considered reasonable unless the plan or issuer provides an easily accessible, transparent, and sufficiently expedient exceptions process to allow an individual to receive coverage without cost sharing for medically necessary preventive services for the individual, as determined by the individual’s attending provider, even if such service is not generally covered under the plan or coverage. 89 Fed. Reg. 85070 (Oct. 25, 2024). The agencies also issued FAQs Part 68 relating to preventive services and the Women’s Health and Cancer Rights Act.
  • Health and Welfare Plans. DOL issues Artificial Intelligence and Worker Well-Being: Principles and Best Practices for Developers and Employers (Oct. 16, 2024)
  • Health and Welfare Plans. IRS issues guidance regarding Preventive Care for Purposes of Qualifying as a High-Deductible Health Plan under Section 223 providing that preventive care shall include over-the-counter oral contraceptives (including emergency contraceptives) and male condoms. R.S. Notice 2024-75.
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