Contribution limit rising for 401(k) plans

The Internal Revenue Service (IRS) has released a notice with cost-of-living adjustments for 2022 affecting the amounts employees can contribute to 401(k) plans and individual retirement accounts (IRAs). The employee contribution limit for 401(k) plans in 2022 is increasing to $20,500, up from $19,500.

The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans is increasing to $14,000, up from $13,500.

The limits used to define a “highly-compensated employee” and a “key employee” are increasing to $135,000 (up from $130,000) and $200,000 (up from $185,000), respectively.

Some retirement plans limits remain unchanged including the employee contribution cap for IRAs (which remain at $6,000) and the catch-up contribution limit for employees 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. Those annual catch-up contributions are still limited to $6,500.