401(k) limit increases to $22,500 for 2023, IRA limit rises to $6,500
Highlights of changes for 2023
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $22,500, up from $20,500.
The limit on annual contributions to an IRA increased to $6,500, up from $6,000. The IRA catch‑up contribution limit for individuals aged 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. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $30,000, starting in 2023. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.
The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2023.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase‑out ranges for 2023:
- For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $73,000 and $83,000, up from between $68,000 and $78,000.
- For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $116,000 and $136,000, up from between $109,000 and $129,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000. For married couples filing jointly, the income phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $73,000 for married couples filing jointly, up from $68,000; $54,750 for heads of household, up from $51,000; and $36,500 for singles and married individuals filing separately, up from $34,000.
The amount individuals can contribute to their SIMPLE retirement accounts is increased to $15,500, up from $14,000.
Health Savings Accounts and High-Deductible Health Plans
|Contribution and Out-of-Pocket Limits|
for Health Savings Accounts and High-Deductible Health Plans
|HSA contribution limit (employer + employee)||Self-only: $3,850 |
|HSA catch-up contributions (age 55 or older)||$1,000||$1,000||No change|
(set by statute)
|HDHP minimum deductibles||Self-only: $1,500|
|HDHP maximum out-of-pocket amounts (deductibles, co-payments and other amounts, but not premiums)||Self-only: $7,500|
|Source: IRS, Revenue Procedure 2022-24.|
HSA Contribution Reminders
- Married couples with HSA-eligible family coverage will share one family HSA contribution limit of $7,750 in 2023. If both spouses have eligible self-only coverage, each spouse may contribute up to $3,850 in separate accounts.
- If both spouses with family coverage are age 55 or older, they must have two HSA accounts in separate names if they each want to contribute an additional $1,000 catch-up contribution.
- If only one spouse is 55 or older but the younger spouse contributes the full family contribution limit to the HSA in his or her name, the older spouse must open a separate account to make the additional $1,000 catch-up contribution.
- Account holders who exceed the contribution limit are subject to an annual 6 percent excise penalty tax on the excess amount unless it is withdrawn from the HSA before the tax deadline for that year.
ACA’s Limits Differ
There are two sets of limits on out-of-pocket expenses for health plans, determined annually by federal agencies, which can be a source of confusion for plan administrators.
The Department of Health and Human Services (HHS) establishes annual out-of-pocket or cost-sharing limits for essential health benefits covered under an ACA-compliant plan, excluding grandfathered plans.
HHS issued the 2023 annual dollar limits on cost-sharing at the end of 2021.
The HHS’s annual out-of-pocket limits are higher than those set by the IRS. To qualify as an HSA-compatible HDHP, a plan must not exceed the IRS’s lower out-of-pocket maximums.
Below is a comparison of the two sets of limits:
|Maximum out-of-pocket for ACA-compliant plans (HHS)||Self-only: $9,100 Family: $18,200||Self-only: $8,750|
Maximum out-of-pocket for HSA-qualified HDHPs (IRS)
The ACA’s self-only out-of-pocket maximum for essential health benefits applies to each individual in a nongrandfathered group health plan, regardless of whether the individual is enrolled in self-only or family coverage.
Excepted-Benefit HRA Maximum
For plan year 2023, Revenue Procedure 2022-24 also raises the maximum amount employers may contribute to an excepted-benefit health reimbursement arrangement (HRA) to $1,950, which is $150 higher than the 2022 amount of $1,800. Excepted-benefit HRAs are limited to paying for vision and dental coverage or similar benefits exempt from the ACA and are not covered by the employer’s primary group plan.