The Internal Revenue Service (IRS) has recently unveiled the anticipated cost-of-living adjustments for the applicable dollar limits on a variety of employer-sponsored retirement and welfare plans for the year 2024. While we await the release of certain health and welfare plan limits, this article will be diligently updated once those figures are made available.
What’s Changing in 2024?
In the forthcoming year, most of the dollar limits subject to adjustments for cost-of-living increases will experience an upturn, presenting potential advantages for employees and retirees. It is worth noting that the Social Security Administration has also released distinct adjustment amounts, which further impact these limits.
The IRS and the Social Security Administration jointly announced the cost-of-living adjustments for 2024, impacting the dollar limits applicable to employer-sponsored retirement and welfare plans. The table below offers a detailed comparison of these limits for select employee benefit programs and the Social Security wage base for both 2023 and 2024.
Key Changes for 2024:
- 401(k) Contribution Limits: The annual contribution limit for 401(k) plans is set to increase in 2024, providing employees with the opportunity to save more towards their retirement.
- IRA Contribution Limits: Similar to 401(k) plans, Individual Retirement Account (IRA) contribution limits will see an increase, allowing individuals to set aside more funds for their retirement.
- Defined Contribution Plan Limits: Employees enrolled in defined contribution plans will enjoy higher annual contribution limits, providing greater flexibility in retirement savings.
- Maximum Annual Benefit Under a Defined Benefit Plan: The maximum annual benefit that can be paid under a defined benefit plan is poised to rise in 2024, offering enhanced financial security to plan participants.
- Social Security Wage Base: The adjustment in the Social Security wage base is vital, as it affects the income subject to Social Security taxes, thereby impacting both employer and employee contributions to the Social Security program.
Pending Health and Welfare Plan Limits:
Certain health and welfare plan limits have not yet been disclosed. These limits play a crucial role in determining the affordability and accessibility of healthcare and other benefits for employees. As such, their release will be closely monitored.
Plan Sponsor Responsibilities:
For plan sponsors, it is imperative to update payroll and plan administration systems to align with the 2024 cost-of-living adjustments. Furthermore, these new limits should be incorporated into relevant participant communications, such as open enrollment materials and summary plan descriptions, to ensure that plan participants are well-informed.
The IRS and the Social Security Administration’s joint announcement regarding the 2024 cost-of-living adjustments will have a substantial impact on employer-sponsored retirement and welfare plans, as well as the Social Security program. These adjustments are designed to aid individuals in their retirement planning and to uphold the stability of Social Security contributions. Stay vigilant for further updates as we continue to track and report on these changes that could significantly affect your financial well-being.
If you have any questions or require additional information about how these adjustments may impact your retirement plans or employee benefits, please don’t hesitate to contact us at Brookshire Benefits. Our experienced team is ready to provide guidance and help keep you in compliance with changing regulations.