IRS Annual Limits for Benefit Plans: 2025 Cost of Living Adjustments
The US Internal Revenue Service (IRS) has released its 2025 cost-of-living adjustments applicable to employee benefit plans. A year-to-year comparison of limitations is below.
Annual Limitations
Effective as of January 1, 2025
|
LIMIT |
2025 |
2024 |
2023 |
|
Elective Deferrals |
|
|
|
|
IRC Section: 402(g)(1); 457(e)(15); 408(p)(2)(E) |
|
|
|
|
401(k), 403(b), 457(b), and SEPs |
$23,500 |
$23,000 |
$22,500 |
|
SIMPLE Plans |
$16,500 |
$16,000 |
$15,500 |
|
Catch-up Contributions (Age 50 and Older)* |
|
|
|
|
IRC Section: 414(v)(2)(B)(i) & (ii) |
|
|
|
|
401(k), 403(b), Governmental 457(b), and SEPs |
$7,500 |
$7,500 |
$7,500 |
|
SIMPLE Plans |
$3,500 |
$3,500 |
$3,500 |
|
Annual Compensation Limit |
|
|
|
|
IRC Section: 401(a)(17); 404(l) |
|
|
|
|
General Limit |
$350,000 |
$345,000 |
$330,000 |
|
Certain Governmental Plans |
$520,000 |
$505,000 |
$490,000 |
|
Limitations on Benefits and Contributions |
|
|
|
|
IRC Section: 415(b)(1)(A); 415(c)(1)(A) |
|
|
|
|
Defined Contribution Plans |
$70,000 |
$69,000 |
$66,000 |
|
Defined Benefit Plans |
$280,000 |
$275,000 |
$265,000 |
|
“Highly Compensated Employee” Definition |
|
|
|
|
IRC Section: 414(q)(1)(B) |
$160,000 |
$155,000 |
$150,000 |
|
“Key Employee”/“Officer” Definition for Top-Heavy Plans |
|
|
|
|
IRC Section: 416(i)(1)(A)(i) |
$230,000 |
$220,000 |
$215,000 |
|
PBGC Guaranteed Annual Benefit |
|
|
|
|
(Single Life Annuity Payable at Age 65; Rounded) |
$89,182 |
$85,295 |
$81,000 |
|
SEP Coverage |
|
|
|
|
IRC Section: 408(k)(2)(C); 408(k)(3)(C) |
|
|
|
|
Minimum Compensation |
$750 |
$750 |
$750 |
|
Maximum Compensation |
$350,000 |
$345,000 |
$330,000 |
|
Health Savings Accounts (HSAs) |
|
|
|
|
Maximum Annual Contributions |
Single: $4,300 | Family $8,500 |
Single: $4,150 | Family $8,300 |
Single: $3,850 | Family $7,750 |
|
Minimum Deductible |
Single: $1,650 | Family $3,300 |
Single: $1,600 | Family $3,200 |
Single: $1,500 | Family $3,000 |
|
Maximum Out-of-Pocket |
Single: $8,300 | Family $16,000 |
Single: $8,050 | Family $16,100 |
Single: $7,500 | Family $15,000 |
|
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) |
|
|
|
|
Maximum Annual Reimbursements |
Single: $6,350 | Family: $12,800 |
Single: $6,150 | Family: $12,450 |
Single: $5,850 | Family: $11,800 |
|
Excepted Benefit Health Reimbursement Arrangements** |
|
|
|
|
Maximum Annual Reimbursements |
$2,150 |
$2,100 |
$1,950 |
|
Health Care Flexible Spending Account Maximum |
|
|
|
|
Salary Reduction Contributions |
$3,300 per employee per unrelated employer |
$3,200 per employee per unrelated employer |
$3,050 per employee per unrelated employer |
|
Dependent Care Assistance Maximum |
|
|
|
|
Maximum |
$5,000*** |
$5,000*** |
$5,000*** |
|
Qualified Transportation Fringe (Monthly) |
|
|
|
|
Parking |
$325 |
$315 |
$300 |
|
Mass Transit Pass/Vanpool |
$325 |
$315 |
$300 |
|
Adoption Assistance Programs |
|
|
|
|
Maximum Exclusion per Child |
$17,280 |
$16,810 |
$15,950 |
|
Phase-Out Floor |
$259,190 |
$252,150 |
$239,230 |
|
Phase-Out Ceiling |
$299,190 |
$292,150 |
$279,230 |
|
Long-Term Care Deductible Premiums |
|
|
|
|
Age 40 and Younger |
$480 |
$470 |
$480 |
|
Age 41 to 50 |
$900 |
$880 |
$890 |
|
Age 51 to 60 |
$1,800 |
$1,760 |
$1,790 |
|
Age 61 to 70 |
$4,810 |
$4,710 |
$4,770 |
|
Over Age 70 |
$6,020 |
$5,880 |
$5,960 |
|
Total FICA Tax (Combined OASDI and HI Portions) |
|
|
|
|
Employers |
7.65% |
7.65% |
7.65% |
|
Employees |
7.65%**** |
7.65%**** |
7.65%**** |
|
FICA Taxes (HI Portion) |
|
|
|
|
Employees and Employers, Each |
1.45%**** |
1.45%**** |
1.45%**** |
|
Wage Base |
All Wages |
All Wages |
All Wages |
|
Social Security Tax (OASDI Portion) |
|
|
|
|
Employers |
6.2% |
6.2% |
6.2% |
|
Employees |
6.2% |
6.2% |
6.2% |
|
Wage Base |
$176,100 |
$168,600 |
$160,200 |
*For individuals who attain 60-63 in 2025, the catch-up contribution limit is increased to $11,250 for most 401(k), 403(b), governmental 457(b) plans, and SEPs, and $5,250 for SIMPLE plans.
**Pursuant to final rules issued June 20, 2019 (84 Fed. Reg. 28888), effective January 1, 2020, an Excepted Benefit HRA can be used to reimburse the costs of certain §213(d) medical expenses for eligible employees. See also Revenue Procedure 2020-43.
***The maximum is $2,500 for married filing separately.
****Higher-income employees will be subject to an additional 0.9% Medicare tax on wages in excess of threshold amounts based on filing status as listed in the table below. Employers are required to withhold the 0.9% Medicare tax on wages paid to an employee in excess of $200,000 without regard to filing status.
|
Filing Status |
Threshold Amount |
|
Married Filing Jointly |
$250,000 |
|
Married Filing Separately |
$125,000 |
|
Single; Head of Household (with Qualifying Person); or Qualifying Widow(er) with Dependent Child |
$200,000 |
The IRS generally adjusts the employee benefit plan contribution limits for inflation, and, as in prior years, the IRS increased the limits based on a cost-of-living index. This includes increases to the qualified retirement plan limitations. For example, the contribution limit (section 415 limitation) for defined contribution plans increased from $69,000 to $70,000. Additionally, the annual compensation limit for purposes of Internal Revenue Code Section 401(a)(17) increased from $345,000 to $350,000 (from $505,000 to $520,000 for certain governmental plans). The limits on elective deferrals to 401(k) plans also increased, from $23,000 to $23,500.
While the limit for catch-up contribution to an applicable employer plan for individuals age 50 and older remains $7,500, as it has been since 2023, for individuals who attain ages 60-63 in 2025, the catch-up contribution limit is increased to $11,250.
The IRS also increased certain limits applicable to health and welfare plans. For example, the maximum annual contribution to a health savings account increased from $4,150 to $4,300 for single filers, and from $8,300 to $8,550 for families. Limits on reimbursements under Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) increased from $6,150 to $6,350 for self-only coverage and $12,450 to $12,800 for family coverage.
Long-term care deductible premium limits are also increased for 2025, following an unusual decrease in 2024.
The Social Security wage base increased from $168,600 to $176,100, which is similar to the increase last year.
