What you really need to know about the 2022 IRS contribution limits announced November 4.
Earlier this month, the Internal Revenue Service (IRS) announced increases in the amounts individuals can contribute to their retirement savings. (See: IRS Announces 401(K) Limit Increases to $20,500).
The details of the announcement covered numerous specific points. Of particular interest to many executives and organizations are: 1.) the deferral contribution limits, 2.) the limits for highly compensated employees (HCEs), and annual contribution and defined benefit plan limits.
The current (2021) limits for each of these items and the new 2022 IRS contribution limits are shown in the chart below.
Drilling down on key aspects of the IRS contribution limits 2022
While retirement savings limits saw conservative gains, these increases reflect the impact of inflation and not an expanded commitment to help working people save more on a pre-tax basis for their retirement. Recognizing this, the call to action for most executives and employees includes these important steps:
- Change your 401(k) deferral percentages so that you max out the increased 401(k) limit and catch-up amount (as appropriate).
- Ensure that you and your employees understand how your qualified pensions and nonqualified plan benefits work under these increased contribution limits.
- And here’s the most important step of all: EDUCATION. As an employee, you must find time in your schedule to ask questions and learn from your plan sponsor’s Human Resources (HR) professionals so that you are educated and equipped to make wise decisions. And as a corporate decision maker, you’ll want to ensure that your company’s most valued resource, your employees, have the knowledge and informational support they need to make sound choices about their retirement savings opportunities.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.
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