On November 10, 2021, the IRS issued Notice 2021-61 which provided annual cost-of-living adjusted limits for qualified retirement plans (see table below). Concurrently, they issued guidance in the form of Frequently Asked Questions (FAQs) to address certain pandemic-related issues concerning workforce shortages and retired individuals.
Updated Limits
| 401(k), 403(b), Profit-Sharing Plans, etc. | 2022 | 2021 |
| Annual Compensation | 305,000 | 290,000 |
| Elective Deferral | 20,500 | 19,500 |
| Catch-up Contributions | 6,500 | 6,500 |
| Defined Contribution Limits | 61,000 | 58,000 |
| ESOP Limits |
1,230,000 245,000 |
1,165,000 230,000 |
| Other | 2022 | 2021 |
| HCE Threshold | 135,000 | 130,000 |
| Defined Benefit Limits | 245,000 | 230,000 |
| Key Employee | 200,00 | 185,000 |
| 457 Elective Deferrals | 20,500 | 19,500 |
| Control Employee (compensation-based) |
245,000 |
235,000 |
| Taxable Wage Base |
147,000 |
142,800 |
Pension Plan FAQs
- FAQ #1: If a qualified pension plan does not provide for in-service distributions and the plan sponsor rehires a previously retired individual due to unforeseen hiring needs related to the COVID-19 pandemic, will the rehire cause that individual’s prior retirement to no longer be considered a bona fide retirement?
- The IRS indicated that, generally, the answer is no. As long as the Plan’s provisions do not define a “bona fide retirement” in a way that prevents the rehire of the retiree, the individual’s reemployment would not cause the prior retirement to fail be meet the “bona fide” definition.
- FAQ #2:May a qualified pension plan permit individuals who are working to commence in-service distributions.
- The IRS indicated that the answer is yes. As long as the individual has attained either age 59 ½ or the Plan’s normal retirement age (as defined), the plan may generally allow individuals to commence such “in-service distributions”.
More information on the FAQs can be found on the IRS’ website using the following link: Coronavirus-related relief for retirement plans and IRAs questions and answers | Internal Revenue Service (irs.gov)
Keep an eye on Meaden & Moore’s blog for future employee benefit plan content important to your compliance efforts or contact us for more details.
