The Internal Revenue Service (IRS) recently announced information on defined benefit and defined contribution plan limits for 2023. Additionally, the Social Security Administration recently announced a Social Security wage base adjustment for 2023.
On October 21, the IRS released the 2023 cost of living adjustments (IRS Notice 2022-55) applicable to defined benefit and defined contribution plans (highlights below).
| 2023 | 2022 |
Elective deferral limit for purposes of cash or deferred arrangements [401(k) plans] and tax-sheltered annuities [403(b) plans] | $22,500 | $20,500 |
Maximum deferral limit for 457 plans | $22,500 | $20,500 |
>Age 50 catch-up contribution limit to 401(k), 403(b) or 457(b) plans | $7,500 | $6,500 |
Maximum deferral limit for SIMPLE plans | $15,500 | $14,000 |
>Age 50 catch-up contribution limit to SIMPLE plans | $3,500 | $3,000 |
2023 Social Security Cost-of-Living Adjustment
The Social Security wage base in 2023 will increase to $160,200 from 2022 wage level of $147,000. The combined Social Security and Medicare tax rate remains at 7.65% and the Social Security portion is 6.2% on wages up to the applicable maximum taxable amount; the Medicare portion is 1.45% on all wages.
The Affordable Care Act imposes an additional 0.9% Medicare tax on high wage earners, applicable on earnings in excess of $200,000 in a calendar year.