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New 401(k) Limits for 2023

401(k) Changes for 2023

With a new year there are some major 401(K) retirement changes for payroll administrators to follow in 2023. While some aspects will stay the same, the major changes are the increase that individuals can contribute to their 401(K), catch-up contribution for employees, maximum employee deferral + catch-up, defined contribution maximum limit under 49, defined contribution maximum limit over 50, employee compensation limit, key employee compensation threshold, and highly compensated employee threshold.

The IRS announced the amount individuals can contribute to their 401(k) will increase to $22,500 in 2023, up from $20,500. The total annual contribution will also increase to $66,000 in 2023, up from $61,000, as long as the annual cap isn’t met there is no limit to the amount an employer can contribute.

401k limits 2023

401(k) Contributions

In the chart below, the increase change for 2023 is defined.

Defined Contribution Plan Limits




Maximum employee contribution




Catch-up contribution for employees (age 50 or older by year-end)




Maximum employee elective deferral plus catch-up contribution (age 50 or older)




Defined contribution maximum limit, employee + employer (age 49 or younger)




Defined contribution maximum limit (age 50 or older)




Employee compensation limit for calculation contribution




Key employee compensation threshold for top-heavy plan testing




Highly compensated employee threshold nondiscrimination testing





Compliance of a 401(k) Plan is Key

One important fact to not forget, 401(k) programs are a total annual contribution amount for each employee over all their 401(k) plans. It is imperative that each employee keep a close eye on their annual total if they have multiple 401(k) accounts. Each employee is only eligible for employer and employee contributions for the first $330,000, a cap that is in place to make retirement savings fair across the board for all employees.

Is Now the Time to Offer a Retirement Plan

While the increase might not seem significant it offers a great opportunity for employers to consider adding retirement savings program to the benefits they already offer. Many employees expect a 401(k) plan and it can also offer an opportunity for companies to help retain and recruit good talent. Plus, it can offer a tax savings for the business while offering all these great benefits and engagement with employees.

Administrative Burden

Do not worry about the potential administrative burden of handling a 401(k), we can provide all the reporting and 401(k) management that your company might need.


DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.