While it won’t be official until sometime in mid-to-late October, it’s looking more and more like the 2024 401(k) contribution limit will receive a $500 boost to $23,000 from the $22,500 limit in 2023, based on recent forecasts from both Mercer and Milliman.
In a report released on Aug. 17, benefits consulting firm Mercer projected that almost every key Internal Revenue Code (IRC) limit for qualified retirement plans will rise from 2023 to 2024. The 2024 limits will reflect increases in the Consumer Price Index for All Urban Consumers (CPI-U) from the third quarter of 2022 to the third quarter of 2023.
Only the catch-up contribution limit, which has a relatively large rounding value, is expected to stay the same next year. It is set at $7,500.
Mercer’s forecast aligns with Milliman’s most recent 2024 IRS limits forecast, which also predicts that the 2024 maximum contribution for 401(k), 403(b), and 457 defined contribution plans will rise by $500 to $23,000, and catch-up contribution limits will remain the same.
Mercer 2024 IRC projections
Mercer’s estimates are determined using the tax code’s cost-of-living adjustment and rounding methods, the CPI-U through July, and estimated CPI-U values for August and September. Figures can’t be finalized until after September CPI-U values are published in October. The IRS usually announces official limits for the coming year in the latter part of October.
In looking at other IRC retirement plan limit forecasts, Mercer projects:
• 415(b) defined benefit plan annuity limit will increase to $275,000 from $265,000.
• 415(c) defined contribution plan maximum annual addition is forecast to increase to $68,000 from $66,000, but if significant inflation occurs in August and September, the 415(c) limit could reach $69,000.
• 414(q)(1)(B) highly compensated employee and 414(q)(1)(C) top-paid group limit is forecast to increase to $155,000 from $150,000.
• 416(i)(1)(A)(i) officer compensation for top-heavy plan key employees is projected to increase to $220,000 in 2024 from $215,000 in 2023.
• 401(a)(17) and 408(k)(3)(C) compensation is projected to rise from $330,000 in 2023 to $340,000 in 2024, with Mercer noting that the limit could increase to $345,000 with significant inflation in August and September.
Milliman’s most recent report shows essentially the same forecast in all categories, with the exception of the maximum annual pension for DB plans—where Milliman projects $270,000 to Mercer’s $275,000.
Historic boost in 2023
This year, defined contribution plans got a historic $2,000 contribution limit boost—the largest increase ever in terms of dollars and percentage, just under an unprecedented 10%.
The catch-up provision for participants aged 50 or over also increased for 2023 from $6,500 to $7,500, totaling $30,000 in employee contributions alone.
Annual IRA contributions increased to $6,500 from $6,000, and the catch-up provision remained unchanged at $1,000.
HSA contribution limits get huge 2024 boost
Back in Mid-May, the Internal Revenue Service announced that the annual contribution limit in 2024 for Health Savings Accounts will jump to $4,150 for self-only coverage (up from $3,850 in 2023) and $8,300 for family coverage (up from $7,750 in 2023). The inflation-adjusted amounts mark the largest-ever increase to the amount of money that can contributed to the triple-tax advantaged accounts each year.
The increases are detailed in IRS Revenue Procedure 2023-23 and go into effect in January 2024. HSA account holders age 55 and older can contribute an extra $1,000, which means an older married couple could sock away $10,300 a year, up from $9,750 this year.
To be eligible to contribute, a participant must have an HSA-qualified high-deductible health plan (HDHP) and not be enrolled in Medicare.
SEE ALSO:
• 2024 401(k) Contribution Limit: Milliman Forecasts Modest Increase
• HSA Contribution Limits Get Biggest-Ever Boost for 2024
• 2023 401k Contribution Limits Released: Big COLA Increase for Savers
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
