The Internal Revenue Service (IRS) has released Notice 2023-75, containing cost-of-living adjustments for 2024 that affect amounts employees can contribute to 401(k) plans and individual retirement accounts (IRAs).
The employee contribution limit for 401(k) plans in 2024 has increased to $23,000, up from $22,500 for 2023. Other key limit increases include the following:
- The employee contribution limit for IRAs is increased to $7,000, up from $6,500.
- The IRA catch‑up contribution limit for individuals aged 50 and over remains unchanged at $1,000 for 2024 (despite this limit now including an annual cost‑of‑living adjustment because of legislation enacted at the end of 2022, referred to as “SECURE 2.0”).
- The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans is increased to $16,000, up from $15,500.
- The limits used to define a “highly compensated employee” and a “key employee” are increased to $155,000 (up from $150,000) and $220,000 (up from $215,000), respectively.
- The annual limit for defined contribution plans (for example, 401(k) plans, profit-sharing plans and money purchase plans) is increased to $69,000, up from $66,000.
- The annual compensation limit (applicable to many retirement plans) is increased to $345,000, up from $330,000.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $7,500. Therefore, participants in these plans who are 50 and older can contribute up to $30,500, starting in 2024.
The income ranges for determining eligibility to make deductible contributions to traditional IRAs, contribute to Roth IRAs and claim the Saver’s Credit (also known as the Retirement Savings Contributions Credit) also increased for 2024.
The IRS’s news release contains more details on the cost-of-living adjustments for 2024.