IRS increases 2023 retirement contribution limits ahead of Nov. 1 401(k) deadlineBy on
Associations | Business Practices | Insurance
The Internal Revenue Service has increased the amount individuals can contribute to their 401(k) plans in 2023 to $22,500, up from $20,500 that’s allowed this year. The new contribution limit also applies to 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan.
The increase is the largest ever in terms of dollars and percentage, according to The Wall Street Journal. The changes are due to inflation and cost-of-living adjustments.
The limit on annual contributions to an IRA will increase to $6,500, up from $6,000 and the IRA catch‑up contribution limit for individuals 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $7,500, up from $6,500, meaning those participants can contribute up to $30,000 beginning in 2023. The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.
The IRS has also announced higher tax brackets, which Axios reports is an attempt to stop “bracket creep” — “when inflation pushes taxpayers into higher income tax brackets or reduces the value of credits, deductions, and exemptions,” according to The Tax Foundation.
More detail on all of the IRS’ tax changes can be found here and in Notice 2022-55 on IRS.gov.
Shop owners who offer a SIMPLE IRA retirement savings plan have until Nov. 1 to decide whether a switch to a 401(k) plan might be right for their business and their employees.
A SIMPLE IRA is a calendar-year retirement savings plan, meaning it cannot be changed mid-year. The IRS requires certain requirements to be met prior to Nov. 1 to change to a 401(k) plan for 2023. A 401(k) offers employers the ability to defer more income into the plan and gives gives employers the option to add a Roth IRA provision, according Coley Eckenrode, plan advisor for the Society of Collision Repair Specialists (SCRS)’ 401(k) Multiple Employer Plan (MEP).
SCRS’ MEP was launched on April 1, 2019, to “help participating businesses and employees save expenses relevant to their 401k balances, reduce administrative responsibilities for companies and provide fiduciary support.”
Some of the plan highlights include, according to the MEP website:
- “Ability for each business to customize their own plan features;
- “Administrative support to help with transition, onboarding and employee education;
- “Executive Committee within SCRS that conducts quarterly review of plan and investments;
- “Pre-negotiated declining fee schedule, meaning as the plan grows costs automatically go down;
- “SCRS prepares the annual tax filing (5500);
- “One audit for the entire plan, which saves companies who have to do their own audit thousands of dollars per year.”
Visit www.scrs.com/401k to contact the advisory team and fill out a basic request for more information. More information can also be received during the SEMA Show next week where SCRS will offer consultative services on both its retirement and health plans at booth #31147 in the Upper South Hall of the Las Vegas Convention Center.
In September, SCRS announced the availability of a “unique” new health care solution for its members, with the objective of raising the standard of care for those in the collision repair industry. Decisely, the benefits brokerage and HR services firm that manages the plan, will have representatives in the SCRS booth Tuesday-Friday during the show. Those who wish to make an appointment with Decisely to learn more about what’s offered one-on-one can do so here.
Featured image credit: Darren415/iStock
SCRS to offer health care & retirement plan consultations during SEMA Show