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The Internal Revenue Service recently announced the cost-of-living adjustments (COLA) that will take effect January 1, 2022 (IRS Notice 2021-61). These COLAs affect various contribution and deduction limits for qualified retirement plans, as well as the deductible contribution limits for traditional Individual Retirement Arrangements (IRAs).
Section 415 of the Internal Revenue Code (“Code”) provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost-of-living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
Increased Limits
Unchanged Limits
Quick reference guide to key limitations for 2021 and 2022
Item 2021 Limit 2022 Limit
401(k)/403(b)/457 $19,500 $20,500
Elective Deferral Limit
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Defined Contribution Plan $58,000 $61,000
Annual Limit
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Defined Benefit Plan $230,000 $245,000
Annual Limit
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Annual Compensation Limit $290,000 $305,000
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Catch-Up Contribution Limit $ 6,500 $ 6,500
401(k)/403(b)/457(b)/SEP
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Highly Compensated Employee $130,000 $135,000
Compensation Threshold
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Key Employee $185,000 $200,000
Compensation Threshold
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Social Security Taxable $142,800 $147,000
Wage Base
Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services. Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice. Registration with the SEC does not imply any level of skill or training.
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