The Internal Revenue Service has announced in its annual update various 2025 employee benefit plan limits and thresholds for employer plan sponsors to begin incorporating into their ongoing benefits administration and compliance efforts.
Retirement Plans
The following chart shows the retirement plan limits and corresponding increases for 2025. Notably, the maximum catch-up contribution amount under the Internal Revenue Code of 1986, as amended (the Code), remained unchanged at $7,500 for individuals aged 50 to 59 or 64 or older, to a Code Section 401(k), 403(b), or to most 457 plans. Beginning in 2025, the Setting Every Community Up For Retirement Enhancement Act 2.0 of 2022 (SECURE 2.0) increases the basic catch-up contribution limit for an individual who reaches age 60 to 63 in the plan year to $11,250, allowing these retirement plan participants to save more for retirement.[1]
| Limit or Threshold | 2024 | 2025 |
|---|---|---|
| Maximum salary-reduction contribution for an individual to a 401(k) plan or a 403(b) plan or to most 457 plans | $23,000 | $23,500 |
| New maximum catch-up contribution for an individual age 60 to 63, to a 401(k) plan or 403(b) plan or to most 457 plans | N/A | $11,250 |
| Maximum annual benefit under a qualified defined benefit plan | $275,000 | $280,000 |
| Maximum “annual addition” under a qualified defined contribution plan | $69,000 | $70,000 |
| Maximum compensation for an individual that can be taken into account under a qualified plan | $345,000 | $350,000 |
| Maximum compensation for an individual that can be taken into account under certain governmental plans | $505,000 | $520,000 |
| Minimum annual compensation for an individual to be treated as a “highly compensated employee” for the following year | $155,000 | $160,000 |
| Minimum annual compensation for an officer to be treated as a “key employee” as to a qualified plan | $220,000 | $230,000 |
| Dollar amount for determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period | $1,380,000 | $1,415,000 |
| Dollar amount used to determine the lengthening of the five-year distribution period under an employee stock ownership plan | $275,000 | $280,000 |
Welfare Benefit Plans
The following chart shows the updated 2025 welfare benefit plan limits and thresholds.
| Limit or Treshold | 2024 | 2025 |
|---|---|---|
| Limit on voluntary employee salary-reduction contributions to a health flexible-spending arrangement under a cafeteria plan | $3,200 | $3,300 |
| Maximum annual health savings account contributions for an individual with self-only coverage under a high deductible health plan (HDHP) | $4,150 | $4,300 |
| Maximum annual health savings account contributions for an individual with family coverage under an HDHP | $8,300 | $8,550 |
| Minimum annual deductible under an HDHP with self-only coverage | $1,600 | $1,650 |
| Minimum annual deductible under an HDHP with family coverage | $3,200 | $3,300 |
| Maximum out-of-pocket expense limit under an HDHP with self-only coverage | $8,050 | $8,300 |
| Maximum out-of-pocket expense limit under an HDHP with family coverage | $16,100 | $16,600 |
Individual Retirement Accounts (Code Sections 408 and 408A)
The following limits will apply to IRAs in 2025:
- The limit on annual contributions to an IRA remains unchanged at $7,000. The additional catch-up contribution limit for individuals age 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
- The IRA deduction for contributions to a traditional IRA is phased out for those who have modified adjusted gross incomes (AGI) within a certain range. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, IRA deductions are phased out if the couple’s 2025 AGI is between $236,000 and $246,000, up from $230,000 to $240,000 for 2024. For married couples filing jointly, where the spouse who makes the IRA contribution is covered by a workplace retirement plan, the 2025 AGI phase-out range for IRA deductions is $126,000 to $146,000, up from $123,000 to $143,000 for 2024. For single individuals and heads of household who are covered by a workplace retirement plan, the 2025 AGI phase-out range for IRA deductions is $79,000 to $89,000, up from $77,000 to $87,000 for 2024. For a married individual filing a separate return who is covered by a workplace retirement plan, the AGI phase-out range for IRA deductions is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
- The 2025 AGI phase-out range for Roth IRA eligibility in 2025 is $236,000 to $246,000 for married couples filing jointly, up from $230,000 to $240,000 for 2024. For single individuals and heads of household, the 2025 AGI phase-out range for Roth IRA eligibility is $150,000 to $165,000, up from $146,000 to $161,000 for 2024.
SIMPLE Retirement Accounts and Plans (Code Sections 408(p) and 401(k)(11))
The following limits will apply to Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) retirement accounts/plans in 2025:
- The limit on annual contributions to a SIMPLE retirement account/plan increased from $16,000 to $16,500. The catch-up contribution limit for individuals age 50 to 59 or 64 or older remains unchanged at $3,500. For an individual age 60 to 63 in 2025, the increased catch-up contribution limit is $5,250.
- Pursuant to a change made under SECURE 2.0, participants in certain SIMPLE retirement accounts/plans of small employers have an increased annual contribution limit of $17,600 and an increased catch-up contribution limit of $3,850.
Wage Base for Social Security Tax
In addition to the above adjustments, the Social Security Administration has announced that the wage base for Social Security taxes for 2025 will be $176,100. The 2024 wage base is $168,600.
For further information, please contact the author of this article or any other member of the McGuireWoods employee benefits team.
[1] IRS/Treasury guidance is needed to confirm whether the increased age 60-63 catch-up contribution limit is an optional or required limit where an applicable qualified retirement plan currently offers catch-up contributions.