Mercer projects 2025 retirement plan limits
September 11, 2024
Mercer projects that every key Internal Revenue Code (IRC) limit for qualified retirement plans will likely rise from 2024 to 2025. The 2025 limits will reflect increases in the Consumer Price Index for All Urban Consumers (CPI-U) from the third quarter of 2023 to the third quarter of 2024.
Mercer’s estimates are determined using the tax code’s cost-of-living adjustment and rounding methods, the CPI-U through August, and estimated CPI-U values for September. The table below shows two possible numbers for several limits that are close to their rounding thresholds. Figures can’t be finalized until after September CPI-U values are published in October. IRS usually announces official limits for the coming year in late October or early November.
The table below shows Mercer’s projections of the 2025 limits compared with the actual 2024 amounts. The table also includes the new, higher catch-up contribution limits applicable to participants ages 60‒63 as implemented by the SECURE 2.0 Act of 2022 (Div. T of Pub. L. No. 117-328). These limits first take effect for 2025 tax years.
| IRC retirement plan limit | Projected 2025 |
2024 |
|---|---|---|
| 401(k), 403(b) and eligible 457 plan elective deferrals (and designated Roth contributions) | $23,500/ |
$23,000 |
| 414(v)(2)(B)(i) catch-up contributions (plans other than SIMPLE plans) | ||
| For employees ages 60‒63† | 11,250/ 12,000* |
7,500 |
| For all other employees | 7,500/ 8,000* |
7,500 |
| 415(b) defined benefit plan annuity | 280,000 | 275,000 |
| 415(c) defined contribution plan annual addition | 70,000 | 69,000 |
| 401(a)(17) and 408(k)(3)(C) compensation | 350,000 | 345,000 |
| 414(q)(1)(B) highly compensated employee (HCE) and 414(q)(1)(C) top-paid group‡ | 160,000§ | 155,000 |
| 416(i)(1)(A)(i) officer compensation for top-heavy plan key employee | 230,000 | 220,000 |
*Limit is too close to call. A moderate but not unusual amount of inflation in September will result in the higher limit.
† Assumes necessary SECURE 2.0 technical corrections pass Congress or IRS issues guidance that the age 60‒63 limit is based on the 2025 limit for other participants (not the 2024 limit as provided by the statute)
‡ The HCE limit shown for a year is applied to compensation for that plan year to determine if an employee is an HCE for the following plan year, e.g., an employee with 2024 plan year compensation greater than $155,000 may be an HCE for the 2025 plan year.
§ If inflation is very low or negative in September, the HCE limit will remain at the 2024 level of $155,000.
Related resources
Mercer Law & Policy resources
- User’s guide to SECURE 2.0 (regularly updated)
- Summary of 2024 benefit-related cost-of-living adjustments (Feb. 8, 2024)
- Quick benefit facts for 2024 (Jan. 17, 2024)
- Lawmakers release SECURE 2.0 corrections bill for beta testing (Jan. 12, 2024)
- Quick benefit facts and COLA resources for benefit plans (2020–2024)