On November 1, the Internal Revenue Service announced its annual cost of living adjustments for calendar year 2025. Importantly for retirement plan sponsors, administrators, and participants, certain plan limits are increasing from the 2024 limits due to inflationary changes in the cost-of-living index. For example, the overall defined benefit annual limitation (Internal Revenue Code (“IRC”) § 415(b)) increased to $280,000 (up from $275,000), the overall defined contribution annual limitation (IRC § 415(c)) increased to $70,000 (up from $69,000), the annual compensation limit (IRC § 401(a)(17), IRC § 404(l), IRC § 408(k)(3)(C) and IRC § 408(k)(6)(D)(ii)) increased to $350,000 (up from $345,000), and the elective deferral limitation (IRC § 402(g)(1)) increased to $23,500 (up from $23,000)). However, some limits are not changing, such as the age 50 catch-up contribution limitation (IRC § 414(v)(2)(B)(i)) ($7,500) and the SIMPLE plan age 50 catch-up contribution limitation (IRC § 414(v)(2)(B)(ii)) ($3,500).

New from SECURE 2.0, the catch-up contribution limitation for individuals attaining age 60, 61, 62, or 63 in 2025 to an applicable employer plan is $11,250 (IRC § 414(v)(2)(E)(i); this is $5,250 for SIMPLE plans and SIMPLE retirement accounts).

Also new from SECURE 2.0, the FICA wage threshold for determining which participants are required to make their age 50 catch-up contributions on a Roth basis remains $145,000 for 2025 (IRC § 414(v)(7)(A), not applicable to simplified employee pensions or SIMPLE retirement accounts). Importantly, however, this requirement received an administrative delay from the IRS until 2026.

The limitation on the aggregate amount of length of service awards accruing with respect to any year of service for any bona fide volunteer under IRC § 457(e)(11)(B)(ii) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains $7,500 for 2025.

To assist plan sponsors, Ice Miller's updated Cost of Living Adjustment (COLA) chart lists the cost-of-living adjustments to retirement plan limitations for the years 2015 through 2025. We hope that this chart (which includes the adjusted limits, as well as Pension Benefit Guaranty Corporation guarantees and Social Security and Medicare contribution rates and wage bases for the past ten years) will serve as a helpful reference tool. If you would like to discuss the impact of these cost-of-living adjustments, please do not hesitate to contact the attorney with whom you work in the Employee Benefits Group. If you would like a laminated copy of the chart, please e-mail your name and address to cindy.worth@icemiller.com.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.