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ARTICLE · 02 DECEMBER 2022

Avoid Employee Deferral Limit Excesses

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The Internal Revenue Service (IRS) determines how much 401(k) plan participants can defer into their plan accounts, but many plan participants sometimes fail to fully understand...

United StatesEmployment and HR
James Pellino
James Pellino
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The Internal Revenue Service (IRS) determines how much 401(k) plan participants can defer into their plan accounts, but many plan participants sometimes fail to fully understand or keep these deferral limits top of mind. Participants exceed 401(k) deferral limits for a variety of reasons. While the filing deadline for on-time tax filers has passed for 2022, now is a good time to discuss deferral limits so that plan sponsors and participants can avoid any last-minute scrambling to correct issues in 2023.

2022 DEFERRAL LIMITS

Each year, the IRS sets limits on how much plan participants can defer into their 401(k) plan accounts. In 2022, the limit on employee elective deferrals for all qualified 401(k) plans is $20,500 — a $1,000 increase from 2021. Participants aged 50 or older can add a catch-up contribution of up to $6,500 for a total deferral limit of $27,000.

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