About this time every year, the IRS publishes the Retirement Plan Contribution Limits for 2022 for the following year.

Keeping Up

On November 4, 2021, the IRS announced that the sum individuals can contribute to their 401(k) plans in 2022 will increase to $20,500, up from the $19,500 maximum allowable in 2021 and 2020.

For traditional IRAs and Roth IRA, the total contributions you may make for (2019,2020,2021 and) 2022 can’t be more than $6000 ($7,000 if you’re 50 or older.)

While we have provided links to the complete IRS rulings for the 2022 401(k) and IRA rules and regulations, you can learn a lot from the summaries presented here.

Drilling Down

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $20,500, up from $19,500.

Check the IRS IR-2021-216 News Release for even more details regarding:

  • Income phase-out-ranges for Roth IRA contributions for singles, heads of households, married couples, etc., as follows:
    • For single taxpayers participating in a workplace retirement plan, the phase-out range is raised to $68,000 to $78,000, up from $66,000 to $76,000.
    • For married couples filing jointly, the phase-out range is increased to $109,000 to $129,000, up from $105,000 to $125,000 if the spouse making the IRA contribution is covered by a workplace retirement plan.
    • For a person contributing to an IRA who is not covered by an organization’s retirement plan and is married to a person who is, the phase-out range is boosted to $204,000 to $214,000, up from $198,000 to $208,000.
    • For a married person filing a separate return (and who participates in a workplace retirement plan), the phase-out range is not affected by an annual cost-of-living adjustment, so it remains $0 to $10,000.
  • Low-and moderate-income workers’ limits for Saver’s Credits changes are as follows:
    • $68,000 for married couples filing jointly, up from $66,000;
    • $51,000 for heads of household, up from $49,500; and
    • $34,000 for singles and married individuals filing separately, up from $33,000.
  • Maximums for Simple IRAs for individual savers Is increased to $14,000, up from $13,500
  • Contribution and compensation and limits are calculated based on annual cost-of-living adjustments. The annual limits are as follows:
  • Salary deferrals—$20,500 in 2022 ($19,500 in 2020 and 2021 ($19,000 in 2019)), plus $6,500 in 2020, 2021, and 2022 ($6,000 in 2015–2019), if the employee is ≥ 50 years old (IRC Sections 402(g) and 414(v)).
  • Annual compensation—$305,000 in 2022, $290,000 in 2021, $285,000 in 2020, up from $280,000 in 2019 (IRC Section 401(a)(17)).
  • Total employee and employer contributions (including forfeitures)— the lesser of 100% of an employee’s compensation or $61,000 for 2022 ($58,000 for 2021 not including “catch-up” elective deferrals of $6,500 in 2021 and 2022 for employees ≥ 50 years old) (IRC section 415(c)).

Catching Up

The catch-up contribution limit remains unchanged at $6,500 for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. Starting in 2022, then, participants who are 50 and older adding to their 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan can contribute up to $27,000. For employees aged 50 and over who participate in SIMPLE plans, the catch-up remains unaffected at $3,000.

Links to more retirement and cost-of-living adjustments for 2022 can be found here.

Checking In

We always get questions about deducting IRA contributions. The IRS says your traditional IRA contributions may be tax-deductible, however, it might be limited if you or your spouse has a retirement plan at work and your income is above certain levels. The place to check is here for 2022 and 2021 limits for various scenarios and deduction limits.

Working Through

Please work closely with your retirement plan administrators to ensure you are knowledgeable of and in incompliance with the new limits. The IRS has some “FAQs” that can answer your questions regarding contributions, withdrawals, and even a page on COVID-19 Relief for Retirement Plans and IRAs. and a plethora of web pages and PDFs. For small businesses, we recommend Publication 560 (2020), Retirement Plans for Small Business.

LSL is always happy to guide you in this endeavor, and help you work through any accounting challenges in your business. Contact us today.

 

Retirement Plan Contribution Limits for 2022