401(k) and Other Benefit Plan Limits for 2025

Every year, the IRS announces cost of living adjustments regarding 401(k) and other plans. The limits that will be in effect for 2025 were announced in IRS Notice 2024-80 and are listed below.

Deferral Limit. The deferral limit for a 401(k) is increased from $23,000 to $23,500. This also applies to 403(b) plans as well as 457(b) government and tax-exempt plans.

Catch-up Contribution Limit. The catch-up contribution limit for those age 50 or older remains at $7500. Under a change made in SECURE 2.0, effective January 1, 2025, the catch-up contribution limit for those who attain age 60, 61, 62, or 63 in 2025 is $11,250. We believe this expanded catch-up provision is optional at this time.

Highly Compensated Employees. The definition of highly compensated employees is increased from $155,000 in 2024 to $160,000 for 2025 ($155,000 in 2024 for HCE determinations in 2025).

Total Contributions to a 401(k) or 403(b) Plan. This amount is increased from $69,000 to $70,000.

Compensation Limit. The maximum compensation limit for a 401(k) or 403(b) plan is increased from $345,000 to $350,000.

In IRS Revenue Procedure 2024-40, the IRS provided an update to the amount that can be contributed to a health flexible spending account.

Health Flexible Spending Arrangements-Cafeteria Plans. For the taxable years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements rises to $3,300, increasing from $3,200 in tax year 2024. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.

High Deductible Health Plans/Health Savings Accounts. For calendar year 2025, the annual limitation on deductions for a Health Savings Account for an individual with self-only coverage under a high deductible health plan is $4,300. For calendar year 2025, the annual limitation on deductions for a Health Savings Account for an individual with family coverage under a high deductible health plan is $8,550.

For calendar year 2025, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,650 for self-only coverage or $3,300 for family coverage, and for which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $8,300 for self-only coverage or $16,600 for family coverage.

Taxable Wage Base. The Social Administration announced that the taxable wage base will be $176,100 for 2025. This is the amount that is subject to OASDI tax consisting of 6.2% tax for the employee and 6.2% paid by the employer. There is no limit for the Medicare Hospital Insurance Tax (HI) of 1.45%, employer and employee each-total 2.90%.

For further information, please contact:

Mark Williams

Counsel

203.575.2618

[email protected]

Nick Zaino

Partner

203.578.4270

[email protected]

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.