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ARTICLE · 08 NOVEMBER 2024

Benefit Plans: 2025 COLAs

Fredrikson & Byron, P.A.
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The Internal Revenue Service has announced the 2025 cost-of-living adjustments (COLAs) for benefit plans.

United StatesEmployment and HR
Fredrikson & Byron, P.A.
Fredrikson & Byron, P.A.

The Internal Revenue Service has announced the 2025 cost-of-living adjustments (COLAs) for benefit plans. They are as follows:

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  • Annual compensation limit. The compensation limit (IRC 401(a)(17)) applies for calculating benefits and contributions, for general and 401(k) discrimination testing and for determining tax deductions.
  • Elective deferrals (401(k)/Roth/403(b)/457). The calendar year contribution limit applies to pre-tax and Roth salary deferrals.
  • Catch-up contributions. The calendar year dollar limitation applies for catch-up elective deferral contributions for individuals who, in 2025, are age 50 or above. Effective in 2025, plan sponsors can add an optional "super" catch-up for employees reaching age 60-63 during the calendar year. The annual limit for this enhanced catch-up is $11,250 (instead of $7,500) for most deferred compensation plans and $5,250 (instead of $3,500) for SIMPLE IRAs.

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