January 25, 2022

Volume XII, Number 25

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January 25, 2022

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January 24, 2022

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IRS Announces 2022 Retirement Plan Limits

The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits for retirement plans for 2022. Most of the dollar limits currently in effect for 2021 will increase, with only the catch-up contribution limit remaining the same for 2022.

The IRS and the Social Security Administration recently announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement plans and the Social Security wage base for 2022. The IRS is expected to publish the remaining 2022 health and welfare plan limits soon. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2021 and 2022.*

RETIREMENT PLAN LIMITS (guidance link) 2021 Δ 2022
Annual compensation limit $290,000 $305,000
401(k), 403(b) & 457(b) before-tax contributions $19,500 $20,500
Catch-up contributions (if age 50 or older) $6,500 $6,500
Highly compensated employee threshold $130,000 $135,000
Key employee officer compensation threshold $185,000 $200,000
Defined benefit plan annual benefit and accrual limit $230,000 $245,000
Defined contribution plan annual contribution limit $58,000 $61,000
Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period $230,000 $245,000
ESOP limit for determining the maximum account balance subject to the general five-year distribution period $1,165,000 $1,230,000
SOCIAL SECURITY WAGE BASE (guidance link)
Social Security Maximum Taxable Earnings $142,800 $147,000

Plan sponsors should update payroll and plan administration systems for the 2022 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.

* The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year or limitation-year basis.

© 2022 McDermott Will & EmeryNational Law Review, Volume XI, Number 309
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About this Author

Jacob Mattinson Employee Benefits Attorney
Associate

Jacob M. Mattinson focuses his practice on employee benefits and matters related to 401(k), 403(b), pension, executive compensation, health care reform, and cafeteria and welfare plans.

Jacob assists clients in drafting employee benefit plan documents and amendments. He represents clients in matters before the Internal Revenue Service (IRS), US Department of Labor (DOL) and Pension Benefit Guaranty Corporation with respect to plan qualification issues. He also counsels privately and publicly held corporations and tax-exempt entities on a variety of benefits and Employee Retirement...

312-984-3263
Brian J. Tiemann, Labor Attorney, McDermott Law Firm
Partner

Brian J. Tiemann is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.   Brian focuses his practice on a variety of employee benefits matters related to pension plans, 401(k) plans, employee stock ownership plans (ESOPs), cafeteria and welfare plans, executive compensation and the implementation of benefit programs for domestic partners of employees.  He is a member of the Firm’s ESOP Affinity Group and has worked with clients to structure and maintain the qualified status of their ESOPs with the Internal Revenue...

312-984-3268
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