IRS Releases 2024 401(k) Plan Limits

On November 1, 2023, the IRS released the 2024 cost of living adjustments (COLAs) for qualified retirement plans. COLAs for 401(k) defined contributions plans saw modest increases.

• The Limit On Participant Contributions Increased From $22,500 To $23,000.  

This limit includes both pre-tax and after-tax (Roth) contributions. If an individual participates in more than one 401(k) plan, the combined contributions to each plan can’t exceed $23,000.

• The Catch-Up Contribution Limit Remains $7,500.

The catch-up contribution is available to any participant who reaches the age of 50 by the end of the calendar year. The combined contribution limit for employees eligible for the age-50 catch-up contribution is $30,500.

• The Statutory Limit For Participant And Employer Contributions Increased From $66,000 To $69,000.

Annual contributions to a 401(k) plan, including participant contributions, employer matching and discretionary contributions, and employer allocations of forfeitures, but excluding catch-up contributions, cannot exceed the lesser of 100% of a participant’s compensation or this statutory limit. The combined contribution limit for employees eligible for the age-50 catch-up contribution is $76,500.

• The Participant Compensation Limit Increased From $330,000 To $345,000.

This is the maximum compensation amount that can be considered when determining participant and employer contributions.

To ensure that participants who earn high salaries, referred to as “highly compensated employees,” don’t disproportionately benefit from their employer’s 401(k) plan, the IRS requires annual nondiscrimination testing.

• The Limitation Used In The Definition Of “Highly Compensated Employee” Is Increased From $150,000 To $155,000.

In addition, the value of account assets of “key employees” can’t exceed more than 60% of all assets held in an employer’s 401(k) plan (the IRS “top-heavy” test).

• The Limitation Used In The Definition Of “Key Employee” Is Increased From $215,000 To $220,000.

The 2024 COLAs are summarized below.