401(k) Limits Reflect Inflation

The Internal Revenue Code (the "Code") imposes contribution limits on "qualified plans," a term that encompasses 401(k) plans and other less commonly-known retirement plans. The Code also provides a mechanism to adjust for cost-of-living increases. Recently, in Notice 2022-55, the IRS published the 401(k) contribution limits for 2023. For 2023, the contribution limit (for individuals under age 50) for 401(k) plans is $22,500, up from $20,500 for 2022. This $2,000 increase represents a nearly 10% increase, a much higher increase than in recent years; by comparison, the limit increased by a mere $500 from 2019 to 2020, did not increase at all from 2020 to 2021, and increased by $1,000 from 2021 to 2022.