On Nov. 4, 2021, the IRS announced in Notice 2021-61 cost-of-living adjustments ("COLAS") to the tax-qualified retirement plan dollar limits for 2022. Most of the applicable dollar limits currently effective for 2021 will increase significantly compared with prior years. Below is a summary of the limits that are generally relevant for most retirement plans.
Effective Jan. 1, 2022:
- The elective deferral limit for 401(k), 403(b), and eligible 457(b) plans is increased from $19,500 to $20,500.
- The catch-up contribution limit for those aged 50 or older remains stable at $6,500.
- The dollar limit on the annual benefit under a defined benefit plan is increased from $230,000 to $245,000.
- The dollar limit on annual allocations under a defined contribution plan is increased from $58,000 to $61,000.
- The annual compensation limit is increased from $290,000 to $305,000.
- The annual compensation limit for eligible participants in certain governmental plans that, as of Jul. 1, 1993, allowed for the cost of living adjustments to the annual compensation limit in effect at that time is increased from $430,000 to $450,000.
- The dollar threshold for "highly compensated employee" status used in performing various nondiscrimination tests is increased from $130,000 to $135,000.
- The dollar threshold for "key employee" status for officers used in performing the "top-heavy" test is increased from $185,000 to $200,000.
The Social Security Administration recently announced the Social Security Wage Base for 2022 will increase from $142,800 to $147,000.