On October 21, 2022, the Internal Revenue Service announced the cost-of-living adjustments (COLA) to the limits on various employer-sponsored retirement and welfare plans, including employee stock option plans (ESOPs). Effective January 1, 2023, the ESOP limit for determining the maximum account balance subject to the general five-year distribution will increase from $1.23 million to $1.33 million, and the ESOP additional year threshold will increase from $245,000 to $265,000. In addition, the Social Security Administration has announced that the social security COLA would increase by 8.7% in 2023.

Many other contribution and benefit thresholds will also increase significantly from their 2022 limits, including the elective contribution limit for 401(k), 403(b) and 457(b) plans and catch-up contribution limits available to participants age 50 and over.

For more information, see our additional resources on ESOPs:

Why Now Is the Right Time to Consider an ESOP

Becoming the Client: Why an ESOP Attorney Chose to Sell His Company to an ESOP

Navigating Financing Issues Involved in ESOP Transactions: A Q&A with ESOP Experts

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