Our initial forecast in May 2023 can be found here. It includes information about the limits for qualified retirement plans, how these limits are calculated, how they are affected by SECURE 2.0, and why they may be relevant for certain plan sponsors.
June 2023 forecast
Our limit forecast is projected using two assumption sets. One set is based on the current trailing 12 months of consumer price index (CPI) and the second assumes that year-to-date CPI (since September 30, 2022) will continue to increase each month through September 30, 2023, by an estimated 25 basis points (3.0% annual).
Historical rolling 12-month changes in CPI as of each September 30 through 2022, and through June 30 for the current federal fiscal year (FFY), are shown in Figure 1.
Figure 1: Historical 12-month percentage change each September 30, Consumer Price Index, all items, not seasonally adjusted
Source: U.S. Bureau of Labor Statistics.
The CPI as reported by the BLS for the 12 months ended June 30, 2023, was 3.0%, down from 4.0% from the 12 months ended May 31, 2023. This change of -1.0% has reduced the forecast for four of the 2024 IRS limits from our May forecast. It is down significantly from the 8.2% annual change in CPI as of September 30, 2022, but still higher than the 2.5% average annual change over the past 10 and 20 years.
Since September 30, 2022, CPI has increased about 2.8%. Projecting monthly increases of 0.25% through September 2023 results in an annual increase of 3.6% for our nine-month actual, three-month forecast.
The chart in Figure 2 below shows the limit forecasts under both assumption sets. Values that changed from the May forecast are in bold in the table.
An analysis of the cumulative three-month changes in CPI for July through September 2023 that would result in the limits increasing or decreasing from this June forecast is shown below (using the IRS rounding rules).
| Change in CPI for July through September 2023 | Change in 2024 IRS limits |
|---|---|
| Increase of slightly more than 0.25% per month, i.e., about 0.77% for three months | Increase in compensation limit and maximum annual addition for DC plans compared to the June forecast |
| Decrease of nearly -0.50% per month, i.e., about -1.49% for three months | Decrease in compensation limit, maximum annual annuity pension, maximum annual addition for defined contribution (DC) plans, and highly compensated employee (HCE) dollar amount, compared to the June forecast |
As a comparison, the CPI increase in June 2023 of 0.3% is much less than the 1.4% increase in CPI back in June 2022, resulting in the 1.0% decrease in the 12-month cumulative rate mentioned above.
BLS is expected to release the July CPI results on August 10, 2023, at which time this forecast will be updated.
Please contact your Milliman consultant for details and questions about how these limits apply to your retirement plan(s).
Figure 2: 2024 IRS limits forecast using actual Federal Fiscal Year 2023 CPI as of June 30, 2023
| 2023 IRS limits | Estimated 2024 IRS limits | Dollar increases from 2023 limit | |||
| Category of annual IRS limits | Actual 12-month trailing CPI as of 6/30/2023 | 9-month actual 6/30/2023, 3 months forecast to 9/30/2023 | Actual 12- month trailing CPI as of 6/30/2023 | 9-month actual 6/30/2023, 3 months forecast to 9/30/2023 | |
| Maximum annual annuity pension for DB plans | $265,000 | $270,000 | $275,000 | $5,000 | $10,000 |
| Maximum annual addition for DC plans | $66,000 | $68,000 | $68,000 | $2,000 | $2,000 |
| Maximum §401(k), §403(b), §457 deferral for DC plans | $22,500 | $23,000 | $23,000 | $500 | $500 |
| Catch-up contribution limit for DC plans | $7,500 | $7,500 | $7,500 | $0 | $0 |
| Compensation Limit | $330,000 | $340,000 | $340,000 | $10,000 | $10,000 |
| HCE dollar amount | $150,000 | $155,000 | $155,000 | $5,000 | $5,000 |
| Key Employee / Officer Compensation | $215,000 | $220,000 | $220,000 | $5,000 | $5,000 |
| SECURE 2.0 (New) | Actual 2024 limit | ||||
|---|---|---|---|---|---|
| Contribution limit to Emergency Savings Accounts (ESAs) for DC plans | N/A | $2,500 | |||
| Prior year wage threshold triggering Roth catch-up contributions to DC plans | N/A | $145,000 | |||
Actual 12-month trailing CPI-U of 3.0% ending June 30, 2023.
Actual 9-month CPI-U ending June 30, 2023, and 0.25% per month for July through September 2023.