401(k) Contribution Limit Increased to $20,500

The Internal Revenue Service (IRS) has released Notice 2021-61, which contains cost-of-living adjustments for 2022 that affect amounts employees can contribute to 401(k) plans and individual retirement accounts (IRAs). The employee contribution limit for 401(k) plans in 2022 has increased to $20,500, up from $19,500 for 2021 and 2020.

Other key limit increases include the following:

The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans is increased to $14,000, up from $13,500.
The limits used to define a “highly compensated employee” and a “key employee” are increased to $135,000 (up from $130,000) and $200,000 (up from $185,000), respectively.

Key limits that remain unchanged include the employee contribution limit for IRAs (remaining at $6,000) and 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 (remaining at $6,500).