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For 2023, 401(k) Contribution Limit Rises to $22,500 with $7,500 'Catch-Up'

Reaching the 401(k) contribution ceiling can be a long-term savings goal

A hand is holding wooden blocks with the numbers 2020 and 3 on them.

This article was updated.

​Employee 401(k) contributions for 2023 will top off at $22,500—a $2,000 increase from the $20,500 cap for 2022—the IRS announced on Oct. 21. Plan participants age 50 or older next year can contribute an additional $7,500, up $1,000 from 2022.

Inflation is at its highest level since 401(k) annual indexing began, causing 7 percent to 11 percent increases for most 2023 contribution limits. The annual cost-of-living adjustments (COLAs) reflect increases in the Consumer Price Index for All Urban Consumers (CPI-U) from the third quarter of 2021 to the third quarter of 2022. 

The CPI-U rose 8.2 percent for the 12 months ending in September, down from the 9.1-percent high notched for the period ending in June but still near a 40-year high, the U.S. Bureau of Labor Statistics reported on Oct. 13.

The annual 401(k) employee contribution limit "usually goes up by $500 at a time but higher inflation is making it go four steps in one year," commented Harry Sit, CEBS, who edits The Finance Buff blog.

The limit on total employer-plus-employee contributions to defined contribution plans will increase to $66,000 in 2023, up by $5,000 from $61,000 in 2022. "This limit usually increases by $1,000 at a time but now it’s jumping five steps in one year," Sit said.

The IRS announced the 2023 adjustments for 401(k) and similar defined contribution plans, and for defined benefit pension plan, in Notice 2022-55.

401(k) Contributions

Contribution and income limits rising in 2023 for defined contribution plans are charted below.

Defined Contribution Plans 2023 2022 Change

Maximum employee elective deferral (age 49 or younger) 1




Employee catch-up contribution (age 50 or older by year-end) 2




Maximum employee elective deferral plus catch-up contribution (age 50 or older)




Defined contribution maximum limit, employee + employer (age 49 or younger) 3




Defined contribution maximum limit (age 50 or older), all sources + catch-up




Employee compensation limit for calculating contributions




Key employees' compensation threshold for top-heavy plan testing 4




Highly compensated employees’ threshold for nondiscrimination testing 5




1 The $22,500 elective deferral limit is also known as the 402(g) limit, after the relevant tax code section. Participants' annual contributions may not exceed 100% of their compensation.

2 The $7,500 catch-up contribution limit for participants age 50 or older applies from the start of the year for those turning 50 at any time during the year.

3 Total contributions from all sources may not exceed 100% of a participant's compensation.

4 Includes officers of the company sponsoring the plan.

5 For the 2023 plan year, an employee who earned more than $150,000 in 2022 is an HCE.

​Source: IRS Notice 2022-55.

Although these limits were announced as many employers were beginning their open enrollment periods for 2023 benefits, "fortunately, 401(k) contributions can be adjusted during the course of the year and so are less time-sensitive" compared with benefit caps that employees are locked into after their annual enrollment selection, said Kim Buckey, vice president of client services at Optavise, a benefits education, enrollment and health care transparency firm.

Higher compensation, benefits and contribution amounts in qualified retirement plans "could increase the cash cost and/or accounting expense for these plans," wrote Michael Marks and Nati Sulimanoff, consulting actuaries with benefits advisory firm Segal. For instance, the higher compensation limit amount means more of higher-earners' pay becomes eligible for matching contributions, effecting how much plan sponsors budget for this benefit.

Plan sponsors should also "consider the potential impact of the 2023 limit increases on their plan's ability to pass nondiscrimination testing requirements," Marks and Sulimanoff advised.

Annual Limit as a Contribution Goal

HR professionals should convey to employees their plan contribution limits for next year. Not all plan participants will be able to fund their 401(k) accounts up to the maximum, but the contribution cap is a goal they should keep in mind and may encourage those who can defer extra dollars for retirement savings to do so.

Despite the sharp declines in stock and bond funds this year, 401(k) plans continue to see steady contributions, according to Fidelity Investments' analysis of 24,000 corporate defined contribution plans it provides services for, as of June 30.

"Although many Americans are understandably concerned about the economy, record-high inflation and markets at this time, it's encouraging to see the prevailing emotion has been to stay calm and focused on one's retirement objectives," said Kevin Barry, president of workplace investing at Fidelity. "Saving for retirement is a goal that is decades in the making, and there will naturally be many twists and turns. However, the best action savers can take to help achieve success is to consistently save and invest."

In the second quarter of the year, the total savings rate, which reflects a combination of employee and employee 401(k) contributions, was at 13.9 percent, just below Fidelity's suggested savings rate of 15 percent. Men continued to save at higher rates than women (14.7 percent vs. 13.7 percent), while pre-retiree Baby Boomers saved at the highest levels (16.6 percent), although even Generation Z participants saved in the double digits (10 percent).

With the annual increase in the employee contribution limit, a good message for plan participants is that "increasing your contribution rate, even by 1 percent, can make a big difference in your long-term retirement savings," Barry said. "What may seem like a small amount today can have a significant impact on your account balance in 10 or 20 years."

Similarly, The Vanguard Participant Savings Rate Index for 2023 found that a modest increase in participant deferral rates of 1, 2, or 3 percentage points would enable an additional 20 percent of participants to attain a 75 percent income-replacement ratio in retirement. The finding is based on a statistical analysis of historical data for nearly 5 million participants in Vanguard-administered defined contribution plans. 

In Vanguard's plans, 14 percent of participants saved the maximum amount last year, including the catch-up contribution for those age 50 or older.

401(k) After-Tax Contributions

A Roth 401(k) is funded with after-tax dollars and withdrawals are tax-free during retirement, while a traditional 401(k) is funded with pretax dollars and withdrawals are taxed as income during retirement.

Many plans allow participants to convert dollars in a traditional 401(k) account to the plan's Roth account, although the participant must then pay income taxes on all dollars (pretax contributions and earnings) being converted. When withdrawn from the Roth account during retirement, no taxes are subsequently owed.

Some plans, however, will also allow employees to make additional after-tax—but non-Roth—contributions to a traditional 401(k) account once the 2023 participant contribution limit of $22,500 (or $30,000 after age 50) is exceeded, up to the "all sources" employer-plus-employee contribution limit of $66,000 (or $73,500 after age 50).

If the plan document allows after-tax contributions to traditional 401(k) accounts, then by following the correct steps employees can convert these contributions to Roth dollars within the plan, or to a Roth individual retirement account (IRA), so that the after-tax traditional 401(k) contributions become, effectively, Roth contributions. At the time of the conversion, only earnings are taxed as income, while the dollar amount of the after-tax plan contributions will covert tax free.


IRS records show that the vast majority of employees comply with annual limits on the amount of compensation that they can contribute to their 401(k) plans, according to a 2018 report by the Treasury Inspector General for Tax Administration. Nonetheless, the inspector general identified two areas in which compliance could be improved:

  • Some 401(k) plans did not prevent taxpayers from exceeding the annual limit.
  • Some employees exceed annual limits when contributing to multiple 401(k) plans.

The findings suggest that employers ensure that their payroll systems don't accept participant contributions that exceed the annual dollar limit, and that employers educate plan participants who may be holding more than one job that the annual limit applies to total contributions to all 401(k) plans.

Contributing to Multiple Plans

401(k) plans offered by private employers and 403(b) plans, designed for tax-exempt and nonprofit organizations such as schools, hospitals and religious groups, meet specifications laid out in Section 401(a) of the U.S. tax code and are therefore known as tax-qualified plans. Both plan types share the same tax advantages, contribution limits, Roth options and early withdrawal penalties, although some of the rules regarding plan administration and compliance with the Employee Retirement Income Security Act (ERISA) differ.

But 457 plans, offered by state and local public employers and some nonprofit employers, are considered nonqualified retirement plans and are not governed by ERISA. In addition, 457 plans differ from 401(k) and 403(b) plans with regard to catch-up contributions, early withdrawals and hardship distributions.

If an employee has both a 401(k) and 403(b) retirement plan, whether from the same or different employers, their combined contributions to both plans together are capped at $22,500 for 2023 plus the $7,500 catch-up contribution for participants who are age 50 or older, while employer-plus-employee contributions top off at $66,000 for both plans combined, plus the catch-up amount.

However, the IRS allows participants who contribute to a 401(k) and a 457 plan at the same time to contribute the maximum amount to both plans separately, and the same holds for employer-plus-employee limits. Likewise, participants with a 403(b) plan and a 457 plan can contribute to each separately up to each plan's annual limit.

[SHRM members-only Toolkit: Designing and Administering Defined Contribution Retirement Plans]

Defined Benefit Plan Limits

Sponsors of defined benefit pension plans should note that the IRS announced the following COLAs under tax code Section 415, also taking effect on Jan. 1:

  • Annual benefit limit.The maximum annual benefit that may be provided through a defined benefit plan is increased to from $245,000.
  • Separation from service. For a participant who separated from service before Jan. 1, 2023, the annual benefit limit for defined benefit plans is computed by multiplying the participant's compensation limit, as adjusted through 2022, by 1.0833. This is an increase from the previous year, when the participant's compensation limit, as adjusted through 2021, was multiplied by 1.0534.

Separately, the federal Pension Benefit Guaranty Corp., which insures private-sector defined benefit pension plans, posted 2023 premium rates for single-employer and multiemployer pension plans.

The increase in limits may affect a defined benefit plan's funded status and "even trigger certain restrictions on plan operations if the funded status falls below applicable thresholds," Segal's Marks and Sulimanoff noted.

In addition, "increases in PBGC premium rates and the resulting increase in PBGC premium expenses can result in increased DB pension plan funding costs and accounting expense," they pointed out. "Typically, this is reflected as an increase in the provision for assumed plan administrative expenses."

Other Employer Plans

IRS Notice 2021-61 also provided adjusted limits and thresholds for other workplace retirement plans:

  • For SIMPLE (savings incentive match plan for employees of small employers) retirement accounts, the maximum contribution limit is increased to $15,500 from $14,000. The SIMPLE plan catch-up contribution limit for employees aged 50 and over is increased to $3,500, up from $3,000.
  • For simplified employee pensions (SEPs), the minimum compensation threshold is increased to $750, up from $650. The SEP maximum compensation limit rises to $330,000, up from $305,000.


The limit on annual contributions to an IRA rises to $6,500, up from $6,000. The additional catch-up contribution limit to an IRA for individuals age 50 and over remains $1,000 (not indexed for inflation).

Although personal IRAs are not employer plans, the amount that account holders can contribute annually is affected by whether they have a workplace retirement plan and how much they earn.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs, and eligibility to contribute to Roth IRAs, increased for 2023 as shown below.


Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either they or their spouse was covered by a retirement plan at work, the deduction may be phased out until it is eliminated, depending on filing status and adjusted gross income (AGI):

  • For single people covered by a workplace retirement plan, the IRA phase-out range is $73,000 to $83,000, up from $68,000 to $78,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $116,000 to $136,000, up from $109,000 to $129,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $218,000 and $228,000, up from $204,000 and $214,000.
  • For married individuals filing a separate return who are covered by a workplace retirement plan, if they lived with their spouse at any time during the year, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.


The 2022 AGI phase-out range for taxpayers contributing to a Roth IRA are:

  • For singles and heads of household, the income phase-out range is $138,000 to $153,000, up from $129,000 to $144,000.
  • For married couples filing jointly, the income phase-out range is $218,000 to $228,000, up from $204,000 to $214,000.
  • For married individuals filing a separate return, if they lived with their spouse at any time during the year, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Saver's Credit

The 2023 income limit for the Saver's Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is increased to:

  • $73,000 for married couples filing jointly, up from $68,000.
  • $54,750 for heads of household, up from $51,000.
  • $36,500 for singles and married individuals filing separately, up from $34,000.

Related SHRM Articles:

2023 Health FSA Contribution Cap Rises to $3,050, SHRM Online, October 2022

2023 Social Security Wage Cap Jumps to $160,200 for Payroll TaxesSHRM Online, October 2022

2023 Tax Bracket Changes Could Increase Workers' Take-Home Pay, SHRM Online, October 2022

IRS Sets 2023 Health Plan Premium Affordability Threshold at 9.12% of PaySHRM Online, August 2022

IRS Announces Spike in 2023 Limits for HSAs and High-Deductible Health PlansSHRM Online, April 2022

View 2023 Benefit Plan Limits & Thresholds Chart.

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