2023 IRS Limits Forecast - May
The initial edition of our forecast includes how the limits are calculated and why they may be relevant for plan sponsors.
Our initial forecast in April 2022 can be found here, and includes information on what the limits are for qualified retirement plans, how the limits are calculated, and why they may be relevant for certain plan sponsors.
May 2022 forecast
Inflation in the 12 months ending May 31, 2022, was 8.6% as reported by BLS on June 10, 2022.
With only four months remaining for federal fiscal year (FFY) 2022, our forecast of the 2023 IRS limits could set a record one-year increase, both in dollars and percentage, even if inflation transitions to 3.0% annually (0.25% per month) for June through September 2022. We note that the chair of the Federal Reserve and the Secretary of Treasury have made statements that inflation is likely to continue at an elevated rate in the near future.
Three of the values in the low-end forecast in column 3 of the table below have increased from the low-end forecast in the April 2022 publication. Those limits are the compensation limit, the sum of individual and employer contributions limit, and the defined benefit (DB) plan annuity limit. In the table, those values that increased from last month are in bold.
While there is no certainty to these forecasts, it is much more likely with only four months remaining in the federal fiscal year that, for 2023:
- The compensation limit will increase to at least $330,000 ($25,000 more than in 2022)
- The sum of individual and employer contribution limits will increase to at least $66,000 ($5,000 more)
- The DB plan annuity limit will increase to at least $265,000 ($20,000 more)
BLS statistics are expected to release the June consumer price index (CPI) results on July 10, 2022, at which time this forecast will be revised.
If you have any questions, please contact your Milliman consultant.
Figure 1: 2023 IRS limits forecast using actual federal fiscal year 2022 CPI as of May 31, 2022
| 2022 IRS limits | Estimated 2023 IRS limits | Dollar increase from 2022 IRS limit | |||
| Category of Annual IRS limits | Actual 12 month trailing CPI as of 5/31/22 |
7 month actual 5/31/22, 5 months forecast to 9/30/22 |
Actual 12 month trailing CPI as of 5/31/22 |
7 month actual 5/31/22, 5 months forecast to 9/30/22 |
|
| Compensation limit | $305,000 | $330,000 | $330,000 | $25,000 | $25,000 |
| HCE dollar amount | $135,000 | $150,000 | $145,000 | $15,000 | $10,000 |
| Individuals' elective contributions to savings plans | $20,500 | $22,500 | $22,000 | $2,000 | $1,500 |
| Individuals & employer's elective contributions to savings plans | $61,000 | $66,000 | $66,000 | $5,000 | $5,000 |
| Catch-up contributions for age 50 and over | $6,500 | $7,500 | $7,000 | $1,000 | $500 |
| DB annuity at age 65 | $245,000 | $265,000 | $265,000 | $20,000 | $20,000 |
Source: https://www.bls.gov/cpi/ retrieved June 10, 2022
Actual 12 month CPI-U of 8.3% ending May 31, 2022
Actual 7 month CPI-U ending May 31, 2022 and 0.25% per month for June through September 2022