IRS Annual Limits for Benefit Plans: 2025 Cost of Living Adjustments | Mayer Brown
The US Internal Revenue Service (IRS) has released its 2025 cost-of-living adjustments applicable to employee benefit plans. A year-to-year comparison of limitations is below.
ANNUAL LIMITATIONS
Effective as of January 1, 2025
*For individuals who attain 60-63 in 2025, the catch-up contribution limit is increased to $11,250 for most 401(k), 403(b), governmental 457(b) plans, and SEPs, and $5,250 for SIMPLE plans.
**Pursuant to final rules issued June 20, 2019 (84 Fed. Reg. 28888), effective January 1, 2020, an Excepted Benefit HRA can be used to reimburse the costs of certain §213(d) medical expenses for eligible employees. See also Revenue Procedure 2020-43.
***The maximum is $2,500 for married filing separately.
****Higher-income employees will be subject to an additional 0.9% Medicare tax on wages in excess of threshold amounts based on filing status as listed in the table below. Employers are required to withhold the 0.9% Medicare tax on wages paid to an employee in excess of $200,000 without regard to filing status.
The IRS generally adjusts the employee benefit plan contribution limits for inflation, and, as in prior years, the IRS increased the limits based on a cost-of-living index. This includes increases to the qualified retirement plan limitations. For example, the contribution limit (section 415 limitation) for defined contribution plans increased from $69,000 to $70,000. Additionally, the annual compensation limit for purposes of Internal Revenue Code Section 401(a)(17) increased from $345,000 to $350,000 (from $505,000 to $520,000 for certain governmental plans). The limits on elective deferrals to 401(k) plans also increased, from $23,000 to $23,500.
While the limit for catch-up contribution to an applicable employer plan for individuals age 50 and older remains $7,500, as it has been since 2023, for individuals who attain ages 60-63 in 2025, the catch-up contribution limit is increased to $11,250.
The IRS also increased certain limits applicable to health and welfare plans. For example, the maximum annual contribution to a health savings account increased from $4,150 to $4,300 for single filers, and from $8,300 to $8,550 for families. Limits on reimbursements under Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) increased from $6,150 to $6,350 for self-only coverage and $12,450 to $12,800 for family coverage.
Long-term care deductible premium limits are also increased for 2025, following an unusual decrease in 2024.
The Social Security wage base increased from $168,600 to $176,100, which is similar to the increase last year.
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