This is an update to the Milliman 2023 IRS Limits Forecast using the U.S. Bureau of Labor Statistics (BLS) report published September 13, 2022. It is our fifth and final edition for the year.
The 2023 IRS limits will be finalized using a proscribed formula. With the publication of the August 2022 consumer price index (CPI) of 8.3% (for the 12 months ended August 31, 2022), 11 of the monthly CPI rates are now “set.” Only the September 2022 CPI report (scheduled for release on October 13, 2022) remains outstanding before the IRS will have all the data needed to finalize the actual 2023 limits.
Our initial forecast in May 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.
August 2022 forecast
The CPI for the 12 months ended August 31, 2022, is 8.3%, down from 8.5% for the 12 months ended July 31, 2022. This decline of 0.2% has not changed the forecast of the 2023 IRS Limits from our July edition.
With only one month remaining for federal fiscal year (FFY) 2022, our forecast of the 2023 IRS limits will show that FFY 2022 will set the record for a one-year increase, both in dollars and percentage. See Figure 1.
As this is our last forecast for the year, our final prediction is that for 2023:
- The compensation limit will increase to $330,000 ($25,000 more than in 2022)
- The highly compensated employee (HCE) dollar limit will increase to $150,000 ($15,000 more)
- The individual elective contributions limit will increase to $22,500 ($2,000 more)
- The sum of individual and employer contribution limits will increase to $66,000 ($5,000 more)
- The catch-up contribution limit will increase to $7,500 ($1,000 more)
- The defined benefit (DB) plan annuity limit will increase to $265,000 ($20,000 more)
Your Milliman consultant is available to answer your questions.
Figure 1: 2023 IRS limits forecast using actual federal fiscal year 2022 CPI as of August 31, 2022
| Category of annual IRS Limits | 2022 IRS limits | Estimated 2023 IRS limits | Dollar increase from 2022 |
|---|---|---|---|
| Compensation limit | $305,000 | $330,000 | $25,000 |
| HCE dollar amount | $135,000 | $150,000 | $15,000 |
| Individual's elective contributions to savings plans | $20,500 | $22,500 | $2,000 |
| Individual's + employer's elective contributions to savings plans | $61,000 | $66,000 | $5,000 |
| Catch-up contributions for age 50 and over | $6,500 | $7,500 | $1,000 |
| DB annuity at age 65 | $245,000 | $265,000 | $20,000 |
Source: BLS. (August 2022). Consumer Price Index. retrieved September 13, 2022