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Comp and Benefits Brief
Nov. 15, 2024
2025 Cost-of-Living Adjustments for Benefit Plans
The IRS has released the 2025 cost-of-living adjustments to certain limits, thresholds and penalties that apply to employee benefits plans and programs. While most retirement plan limits and thresholds increased, there were a few reductions to limits and penalties under the Affordable Care Act. Please see below for a breakdown of these changes.
Qualified Retirement Plan Changes for 2025[1]
|
|
Provision |
2025 |
2024 |
Change? |
|
401(k)/403(b) Plans |
Annual Limit on Deferrals |
$23,500 |
$23,000 |
Yes |
|
Annual Catch-up Limit, 50 years or older |
$7,500 |
$7,500 |
No |
|
|
Annual Catch-up Limit, Age 60-63 |
$11,250 |
$7,500 |
Yes |
|
|
Annual Limit on Contributions (DC Plans) |
$70,000 |
$69,000 |
Yes |
|
|
General Limits & Thresholds |
HCE Prior Year Compensation Threshold |
$160,000 |
$155,000 |
Yes |
|
Key Employee Compensation Threshold |
$230,000 |
$220,000 |
Yes |
|
|
Annual Compensation Limit |
$350,000 |
$345,000 |
Yes |
|
|
ESOP Limits |
Amount Balance Limit Subject to 5-Year Distribution Period |
$1,415,000 |
$1,380,000 |
Yes |
|
Incremental Amount Adding Additional Year(s) to 5-Year Distribution Period |
$285,000 |
$275,000 |
Yes |
|
|
Maximum Withdrawal Amounts |
Domestic Abuse Distribution |
$10,300 |
$10,000 |
Yes |
|
Withdrawal for Emergency Expenses |
$1,000 |
$1,000 |
No |
|
|
Defined Benefit Plans |
Annual Benefit Limit |
$280,000 |
$275,000 |
Yes |
PBGC Premiums for Defined Benefit Pension Plans for 2025
|
|
Premium |
2025 |
2024 |
Change? |
|
Single Employer Plans |
Flat Rate (Per Participant) |
$106 |
$101 |
Yes |
|
Variable Rate for $1,000 of Unfunded Vested Benefits |
$52 |
$52 |
No |
|
|
Per Participant Variable Cap |
$717 |
$686 |
Yes |
|
|
Multiemployer Plans (e.g., union) |
Flat Rate (Per Participant) |
$39 |
$37 |
Yes |
Deferred Compensation Limit Changes for 2025
|
|
Provision |
2025 |
2024 |
Change? |
|
457(b) Plans |
Annual Limit on Contributions |
$23,500 |
$23,000 |
Yes |
|
Annual Catch-up Limit |
$7,500 |
$7,500 |
No |
|
|
409A Deferred Compensation |
Specified Employee Compensation Threshold |
$230,000 |
$220,000 |
Yes |
|
Involuntary Separation Pay Limit |
$700,000 |
$690,000 |
Yes |
Health and Welfare Plan Changes for 2025
|
|
Limitation |
2025 |
2024 |
Change? |
|
HDHP & HSA Limits
|
Annual Deductible – Minimum |
$1,650/$3,300 |
$1,600/$3,200 |
Yes |
|
Out-of-Pocket Expenses (HSA) – Maximum |
$8,300/$16,600 |
$8,050/$16,100 |
Yes |
|
|
HSA Contribution Limit (Individual/Family) |
$4,300/$8,550 |
$4,150/$8,300 |
Yes |
|
|
Catch-Up Limit |
$1,000 |
$1,000 |
No |
|
|
Flexible Spending Account (FSA) |
Health FSA – Employee Contribution Limit |
$3,300 |
$3,200 |
Yes |
|
Health FSA – Maximum Carryover |
$660 |
$640 |
Yes |
|
|
Dependent Care FSA – Employee Contribution Limit |
$5,000 married filing jointly or single
$2,500 married filing separately |
$5,000 married filing jointly or single
$2,500 married filing separately |
No |
Affordable Care Act (ACA) Changes for 2025
|
|
Provision |
2025 |
2024 |
Change? |
|
ACA Limits for Non-Grandfathered Health Plans |
Out-of-Pocket Maximum (Individual/Family) |
$9,200/$18,400 |
$9,450/$18,900 |
Yes |
|
Embedded Individual Maximum within Family Coverage |
$9,200 |
$9,450 |
Yes |
|
|
Affordability |
9.02% |
8.39% |
Yes |
|
|
Penalties |
No Offer of Coverage (Penalty A) |
$2,900 |
$2,970 |
Yes |
|
Coverage Fails Minimum Value or Affordability |
$4,350 |
$4,460 |
Yes |
If you have questions regarding these changes, please contact any member of the Nelson Mullins Employee Benefits and Executive Compensation Group or the Nelson Mullins attorney with whom you work.
[1] Additional changes apply to SEPs and SIMPLEs that are not addressed in this alert.
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These materials have been prepared for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel.