At Pension Investors, we strive to keep to you updated on any major change in the industry as the come along. Recently, the IRS released their 2025 limitations on the contribution amounts into qualified plans, such as 401(k) or Defined Benefit/Cash Balance plans.
These limits will take effect on January 1, 2025. The changes from 2024 to 2025 are not quite as high because the current rate of inflation has leveled off. Please notice the catch-up limit for employees aged 60-63 is now $11,250, and this is brand new starting in 2025.
By the Numbers
| Limit Type | For Calendar Year | |||
| 2025 | 2024 | 2023 | 2022 | |
| Maximum DB Plan Benefit (IRC §415(b)) (applies to limitation years ending in indicated year) | $280,000 | $275,000 | $265,000 | $245,000 |
| Max DC Annual Addition (IRC §415(c)) (applies to limitation years ending in indicated year) | $70,000 | $69,000 | $66,000 | $61,000 |
| Salary Deferral Limit (IRC §402(g)) | $23,500 | $23,000 | $22,500 | $20,500 |
| Catch-up Limit for 401(k), 403(b), 457 plans (applies to calendar year) | $7,500 | $7,500 | $7,500 | $6,500 |
| Catch-up Limit (age 60-63) for 401(k), 403(b), 457 plans (applies to calendar year) | $11,250 | |||
| HCE Compensation (applies to lookback years in indicated year) | $160,000 | $155,000 | $150,000 | $135,000 |
| Max Plan Compensation for Retirement Plan Purposes (IRC §401(a)(17)) (applies to plan years beginning in indicated year) | $350,000 | $345,000 | $330,000 | $305,000 |
| Key Employee: Officer | $230,000 | $220,000 | $215,000 | $200,000 |
| Key Employee: 1% Owner | $150,000 | $150,000 | $150,000 | $150,000 |
| Social Security Taxable Wage Base for OASDI Contributions | $176,100 | $168,600 | $160,200 | $147,000 |
Please reach out your dedicated Administrator if you have any questions about these changes.
Examples
Here are some examples of what an individual Business Owner can contribute to a Plan in 2025 at various ages:
| 401(k) Plan | Compensation | 401(k) | Profit Sharing | Total | |
| Owner Tom’s Widgets | Age 40 | $186,000 | $23,500 | $46,500 | $70,000 |
| Owner Mike’s Widgets | Age 50 | $186,000 | $31,000 | $46,500 | $77,500 |
| Owner Sally’s Widgets | Age 61* | $186,000 | $34,750 | $46,500 | $81,250 |
| 401(k) Plan & Cash Balance Combo | Compensation | 401(k) | Profit Sharing | Cash Balance | Total | |
| Owner Tom’s Widgets | Age 40 | $200,000 | $23,500 | $12,000 | $150,000 | $185,500 |
| Owner Mike’s Widgets | Age 50 | $200,000 | $31,000 | $12,000 | $200,000 | $243,000 |
| Owner Sally’s Widgets | Age 61* | $200,000 | $34,750 | $12,000 | $225,000 | $271,750 |
*If plan adopts for 2025, SECURE Act 2.0 increased the catch-up limit for ages 60-63 to $11,250
Get In Touch
As you can see, there are many different options for various business owners to defer and save for his or her retirement. At Pension Investors, we look at every individual plan and design the best plan for your needs.
Please contact our Sales team at [email protected] if you have any questions.
