On November 4, 2021, the Internal Revenue Service in Notice 2021-61 published the cost-of-living adjustments that apply to dollar limits for retirement plans beginning on January 1, 2022. As anticipated, due to a significant rise in the cost of living, as measured by the Bureau of Labor Statistics (BLS) Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the period covering the third quarter of 2020 to the third quarter of 2021, most limits have been increased.
While the 2022 annual contribution and benefit limits have not changed significantly from last year here are a few of the highlights:
- The annual 401(k) and 403(b) limit has increased to $20,500
- The Elective Deferral limit (SIMPLE Plans) has increased to $14,000
- The Cash Balance/Defined Benefit limit has increased to $245,000
- The Defined Contribution limit has increased to $61,000
- The annual compensation limit increased to $305,000
- The income subject to social security tax increased to $147,000