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IRS Announces Retirement Plan Limits for 2022

November 12, 2021

On November 4, 2021, the IRS published the cost-of-living adjustments that apply to dollar limits for retirement plans beginning on January 1, 2022. As anticipated, due to a significant rise in the cost of living for the period covering the third quarter of 2020 to the third quarter of 2021, most limits have been increased. Annual maximum contribution and maximum plan compensation increased to $61,000 and $305,000 respectively, with SEP eligibility compensation threshold remaining at $650. Defined benefit maximum was increased to $245,000, elective deferral for 401(k), Roth 401(k), 403(b), Roth 403(b), 457 Plans increased to $20,500. SIMPLE IRA deferrals increased to $14,000. No changes were made to catch up amounts for qualified retirement plans or SIMPLE IRAs; Individual Retirement Account (IRA) contribution and catch-up amounts were also unchanged. Note, that generally deferral limits increase in $500 increments while the annual additions limits is adjusted in $1,000 increments, the 2022 adjustment is 2x the norm for salary deferrals (except those applicable to SIMPLE IRAs) and 3x the norm for the total annual account contribution maximum.

On October 13, the Social Security Administration announced a 5.9% cost of living adjustment (COLA), largest since a 7.4% adjustment in 1982, increasing the annual benefit by $1,104 on average. For comparison, COLA was 1.3% in 2021, 1.6% in 2020, and 2.8% in 2019. It is likely the Social Security increases in the next few years will be minor, if any, unless inflation continues at fairly high levels to exceed the current mark.

The maximum amount of earnings subject to the Social Security tax, Taxable Wage Base, will jump by $4,200 from $142,800 to $147,000. This results in a monthly $21.70 Social Security tax increase year-over-year for those with earned income at or above the limit. The new maximum for the self-employed individuals is $22,491 compared to $21,848 in 2021; employees pay one half of that amount with the second half matched by their employers. 

Among other noteworthy changes is the amount individuals under full retirement age may earn before experiencing decrease in their Social Security payments. The 2022 retirement earnings cap increased by $600 from $18,960 to $19,560; after that, $1 of benefits is deducted for every $2 earned above $19,560. This limit does not apply to pensions, investments, or other forms of unearned income. The full retirement age increased from 66 to 66 and 4 months in 2022 for those born in 1956. For them, in the year of the full retirement age the earnings limit will increase to $51,960 and benefits will be reduced by $1 for each $3 earned over this amount for months prior to reaching the full retirement age. The earnings limits do not apply once the full retirement age is reached (currently 66 and gradually increasing to 67, based on the birth year). As in prior years, we have highlighted the year-over-year adjustments for easy identification.

Defined Contribution Plans




Maximum employee elective deferral (age 49 or younger) 1




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



no change

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 $20,500 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 $6,500 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 2022 plan year, an employee who earned more than $135,000 in 2021 is an HCE.

Source: IRS Notice 2021-61.

This summary is designed to provide an overview of the dollar limitations for retirement plans applicable in 2022 and is not comprehensive. It is intended for general information only and is believed to be accurate and reliable as of posting date but may be subject to change. For a complete announcement of the applicable limits see IRS Notice 2021-61 and Social Security Administration’s 2022 Social Security Changes Fact Sheet.