With the publication of the August 2023 consumer price index (CPI) of 3.7% for the 12 months ended August 31, 2023, 11 of the monthly CPI rates are set and only the September 2023 CPI (scheduled for release on October 12, 2023) remains before the final annual limits are calculated.
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.
August 2023 forecast
Historical rolling 12-month changes in CPI as of each September 30, from 2003 through 2022, and through August 31 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 August 31, 2023, was 3.7%, up from 3.2% for the 12 months ended July 31, 2023. This 0.5% increase changed the forecast for two of the 2024 IRS limits from our July 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.
As this is our last forecast for the year, our final predictions for the 2024 IRS limits are shown below.
Figure 2: 2024 IRS limits forecast using actual FFY 2023 CPI as of August 31, 2023
Values in bold have changed from the July 31, 2023, forecast.
| Category of annual IRS limits | 2023 IRS limits | Estimated 2024 IRS limits | Dollar increase from 2023 |
|---|---|---|---|
| Maximum annual annuity pension for DB plans | $265,000 | $275,000 | $10,000 |
| Maximum annual addition for DC plans | $66,000 | $69,000 | $3,000 |
| Maximum §401(k), §403(b), §457 deferral for DC plans | $22,500 | $23,000 | $500 |
| Catch-up contribution limit for DC plans | $7,500 | $7,500 | $0 |
| Compensation Limit | $330,000 | $345,000 | $15,000 |
| HCE dollar amount | $150,000 | $155,000 | $5,000 |
| Key Employee / Officer Compensation | $215,000 | $220,000 | $5,000 |
| SECURE 2.0 (New) | Actual 2024 limit | ||
| Contribution limit to ESAs for DC plans | N/A | $2,500 | |
| Prior year wage threshold triggering Roth catch-up contributions to DC plans* | N/A | $145,000 |
* On August 25, 2023, the IRS established a two-year transition period for DC plans to implement the new Roth catch-up contribution requirement. Plans have until December 31, 2025, to make the necessary changes to their administrative and payroll systems to comply with the requirement that takes effect January 1, 2026.
If the change in CPI from August 2023 to September 2023 is less than 0.056%, the 2024 maximum annual additions for DC plans will be $68,000 instead of $69,000 and the 2024 compensation limit will be $340,000 rather than $345,000. Otherwise, we expect the limits to be as shown in the chart above.
Please contact your Milliman consultant for details and questions about how these limits apply to your retirement plan(s).