December 22

2022 IRS Updates: 401(k), IRA, & COLA

The Internal Revenue Service announced that the amount individuals can contribute to their 401(k) plans in 2022 has increased to $20,500, up from $19,500 for 2021 and 2020. The IRS also distributed information regarding the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year 2022.

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Highlights of Changes for 2022

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased to $20,500, up from $19,500.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver's Credit all increased for 2022 have been updated.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer's spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) 

Here are the phase-out ranges for a Traditional IRA in 2022:


  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased from $68,000 to $78,000, up from $66,000 to $76,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.


Here are the phase-out ranges for a Roth IRA in 2022:


  • For single taxpayers and heads of household, the phase-out range is increased from $129,000 to $144,000, up from $125,000 to $140,000.
  • For married couples filing jointly, the income phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.
  • For a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.


Retirement Savings Contributions Credit

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan. And, beginning in 2018, if you’re the designated beneficiary, you may be eligible for a credit for contributions to your Achieving a Better Life Experience (ABLE) account. The income limit for the Saver's Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $68,000 for married couples filing jointly, up from $66,000; $51,000 for heads of household, up from $49,500; and $34,000 for singles and married individuals filing separately, up from $33,000.

To qualify,  you or your spouse if filing jointly, made either: 


  • Contributions (other than rollover contributions) to a traditional or Roth IRA; 
  • Elective deferrals to a 401(k), 403(b), governmental457(b), SEP, SIMPLE, or to the federal Thrift Savings Plan (TSP); 
  • Voluntary employee contributions to a qualified retirement plan, as defined in section 4974(c) (including the federal TSP); 
  • Contributions to a 501(c)(18)(D) plan 
  • Contributions, as a designated beneficiary of an ABLE account, to the ABLE account, as defined in section 529A.

You must also be:


  • Age 18 or older
  • Not claimed as a dependent on another person’s return
  • Not a student.

You do not qualify if either of the following applies:


  • Were enrolled as a full-time student at a school, or
  • Took a full-time, on-farm training course given by a school or a state, county, or local government agency.
  • The amount on Form 1040, 1040-SR, or 1040-NR, line 11, is more than $33,000 ($49,500 if head of household; $66,000 if married filing jointly).
  • The person(s) who made the qualified contribution or elective deferral was born after January 1, 2004.
  • The person(s) who made the qualified contribution or elective deferral is claimed as a dependent on someone else’s 2021 tax return; or (c) was a student.

Unchanged Key Employee Contribution Limits

The limit on annual contributions to an IRA remains unchanged at $6,000. The IRA catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan remains unchanged at $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan who are 50 and older can contribute up to $27,000, starting in 2022. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000.

Cost-of-Living Adjustments (COLA)

The cost-of-living adjustment for 2022 will be 5.9%, the highest in decades. High inflation and more expensive Medicare Part B premiums will limit how much more beneficiaries could see in their monthly checks. The adjustment procedures used under the Social Security Act are similar to those used to make adjustments to retirement accounts. The Secretary of the Treasury is required to annually adjust these limits for cost-of-living increases. 

DEFINED CONTRIBUTION PLAN LIMITS

2021

2022

EXCLUSION FOR ELECTIVE DEFERRALS

$19,500

$20,500

ANNUAL COMPENSATION

$290,000

$305,000

"KEY EMPLOYEE" IN TOP HEAVY PLAN

$185,000

$200,000

"HIGHLY COMPENSATED EMPLOYEE" 

$130,000

$135,000

ANNUAL COMPENSATION FOR PARTICIPANTS IN CERTAIN GOV'T PLANS

$430,000

$450,000

SIMPLE RETIREMENT ACCOUNT

$13,500

$14,000

DEFERRED COMPENSATION OF STATE & LOCAL GOV'T/

$19,500

$20,500

PREMIUMS PAID WITH RESPECT TO A QUALIFYING LONGEVITY ANNUITY CONTRACT

$135,000

$145,000

"CONTROL EMPLOYEE" FOR FRINGE BENEFIT VALUATION PURPOSES

$115,000

$120,000

AGI FOR MARRIED TAX-PAYERS FILING A JOINT RETURN

$39,500

$31,000

AGI FOR TAX PAYERS FILING AS HEAD OF HOUSEHOLD

29,625

$30,750

AGI FOR ALL OTHER TAX PAYERS

$19,750

$20,500

Call us if you haven't been re-quoted in the last 24 months.

In general, Investment and Plan costs are dropping. Your costs depend on your average participant balance and annual contribution rates.

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