8 November 2024 - DLA Piper
Written by:Todd Castleton, Erin Sweeney
On November 1, 2024, the Internal Revenue Service (IRS) announced cost-of-living adjustments (COLAs) to the dollar limits on benefits and contributions in retirement plans for 2025. These adjustments are in addition to previously announced increases in limits to other employee benefit plans. In addition, the Social Security Administration (SSA) recently announced the COLA to the Social Security wage base for 2025.
The updated limits for 2025, as compared to last year’s limits, are set forth in the charts below.
| Qualified retirement plan contribution limits | 2024 | 2025 |
|---|---|---|
| Section 401(k) and 403(b) plan elective deferral limit (Code Section: 402(g)(1)) |
$23,000 | $23,500 |
| Catch-up contribution limit (for participants aged 50 or older) (Code Section: 414(v)(2)(B)(i)) |
$7,500 | $7,500 |
| Catch-up contribution limit ("super" catch-up for participants aged 60-63) (Code Section: 414(v)(2)(E)(i)) |
N/A | $11,250 |
| Wage threshold for Roth-only catch-up contributions (beginning in 2026) (Code Section: 414(v)(7)(A)) |
$145,000 | $145,000 |
| Annual compensation limit (Code Sections: 401(a)(17), 401(l), 408(k)(3)(C), and 408(k)(6)(D)(ii)) |
$345,000 | $350,000 |
| Defined contribution plans – annual additions limit (Code Section: 415(c)(1)(A)) |
$69,000 | $70,000 |
| Defined benefit plans – maximum annual benefit (Code Section: 415(b)(1)(A)) |
$275,000 | $280,000 |
| Annual distribution dollar amount used to determine the five-year employee stock ownership plan (ESOP) distribution limit (Code Section: 409(o)(1)(C)(ii)) |
$275,000 | $280,000 |
| ESOP limit for determining the maximum account balance subject to the five-year distribution limit (Code Section: 409(o)(1)(C)(ii)) |
$1,380,000 | $1,415,000 |
| Other limits | 2024 | 2025 |
|
Highly compensated employee compensation threshold |
$155,000 | $160,000 |
|
Key employee compensation threshold |
$220,000 | $230,000 |
| Section 457 plan elective deferral limit – deferred compensation plans of state and local governments and tax-exempt organizations (Code Section: 457(e)(15)) |
$23,000 | $23,500 |
| Pension-linked emergency savings accounts (PLESAs) limit (Code Section: 402A(e)(3)(A)(i)) |
$2,500 | $2,500 |
| SIMPLE plans | 2024 | 2025 |
| Maximum contributions (Code Section: 408(p)(2)(E)) |
$16,000 | $16,500 |
| Catch-up contributions (for participants aged 50 or older) (Code Section: 414(v)(2)(B)(ii)) |
$3,500 |
$3,500 |
The SSA announced the COLA to the Social Security contribution and benefit base (also known as the "taxable wage base") for 2025.
| Social Security taxable wage base | 2024 | 2025 |
| Social Security taxable wage base | $168,600 | $176,100 |
Note: Federal Insurance Contributions Act (FICA) tax rates remain unchanged. The Old-Age, Survivors, and Disability Insurance (OASDI) tax of 6.20 percent each for employers and employees (12.4 percent for self-employed individuals) applies to wages up to the Social Security annual taxable wage base. The Medicare tax of 1.45 percent each for employers and employees is not limited to the taxable wage base and applies to all wages.
An additional Medicare tax of 0.9 percent for employees only applies to all wages over specified income thresholds based on filing status ($250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for all other taxpayers). Employers are responsible for withholding the 0.9 percent additional Medicare tax on an individual's wages paid in excess of $200,000 in a calendar year, without regard to filing status. An employer is required to begin withholding additional Medicare tax in the pay period in which it pays wages in excess of $200,000 to an employee and continue to withhold the tax each pay period until the end of the calendar year. There is no employer match for additional Medicare Tax.
The health savings account (HSA) and high-deductible health plan (HDHP) limits are as follows:
| HSA/HDHP limits | 2024 | 2025 |
|---|---|---|
| HSA maximum health savings account contribution |
Self: $4,150 Family: $8,300 |
Self: $4,300 Family: $8,550 |
| HSA catch-up contribution (for participants aged 55 or older) | $1,000 | $1,000 |
| HDHP minimum annual deductible |
Self: $1,600 Family: $3,200 |
Self: $1,650 Family: $3,300 |
| HDHP maximum out of pocket |
Self: $8,050 Family: $16,100 |
Self: $8,300 Family: $16,600 |
The flexible spending account (FSA) limits are as follows:
| FSA limits | 2024 | 2025 |
|---|---|---|
| Health FSA |
$3,200 Maximum carryover to following plan year: $640 |
$3,300 Maximum carryover to following plan year: $660 |
| Dependent care FSA |
Family: $5,000** Married, filing separately: $2,500 |
Family: $5,000** Married, filing separately: $2,500 |
| **Married and filing a joint return or single parent filing | ||
Excepted benefit health reimbursement arrangement (EBHRA)
| Arrangements | 2024 | 2025 |
|---|---|---|
| EBHRAs | $2,100 | $2,150 |
Transit and parking fringe benefits limit
| Transit and parking fringe benefits limit | 2024 | 2025 |
|---|---|---|
| Transit/parking | $315/month | $325/month |
Action items for employers
Employers are encouraged to:
For more information, please contact any of the members of our Employee Benefits and Executive Compensation group.