Our initial forecast in March 2024 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.
April 2024 forecast
Our limit forecast is projected using two assumption sets. One set is based on the current trailing 12 months of the consumer price index (CPI) and the second assumes that year-to-date CPI (since September 30, 2023) will continue to increase each month through September 30, 2024, by an estimated 25 basis points (3.0% annual).
Historical rolling 12-month changes in the CPI as of each September 30 through 2023, and through April 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 April 30, 2024, was 3.4%, down from 3.5% for the 12 months ended March 31, 2024. It is down slightly from the 3.7% annual change in the CPI as of September 30, 2023, but higher than the 2.8% average annual change over the past 10 years and the 2.6% average annual change over the past 20 years.
Since September 30, 2023, the CPI has increased about 1.9%. Projecting monthly increases of 0.25% through September 2024 results in an annual increase of 3.1% for our seven-month actual/five-month forecast projection.
The chart below shows the limit forecasts under both assumption sets. Values that changed from the March forecast are in bold. There were two changes in the limits from our March forecast:
- The defined benefit (DB) plan benefit limit using the year-to-date CPI method increased from $280,000 to $285,000 to match the amount under the 12-month trailing CPI methodology.
- The wage threshold triggering Roth catch-up contributions under the 12-month trailing CPI methodology dropped from $150,000 to $145,000, matching the year-to-date CPI method.
As a comparison, the CPI increase in April 2024 of 0.4% is less than the 0.5% increase in the CPI back in April 2023, resulting in the 0.1% decrease in the 12-month cumulative rate mentioned above.
BLS is expected to release the May CPI results on June 12, 2024, 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: 2025 IRS Limits Forecast using actual FFY 2024 CPI as of April 30, 2024
| 2024 IRS limits | Estimated 2025 IRS limits | Dollar increases from 2024 limit | |||
|---|---|---|---|---|---|
| Category of annual IRS limits | Actual 12-month trailing CPI as of 4/30/2024 | 7-month actual 4/30/2024, 5-month forecast to 9/30/2024 | Actual 12-month trailing CPI as of 4/30/2024 | 7-month actual 4/30/2024, 5-month forecast to 9/30/2024 | |
| Maximum annual annuity pension for DB plans | $275,000 | $285,000 | $285,000 | $10,000 | $10,000 |
| Maximum annual addition for DC plans | $69,000 | $71,000 | $71,000 | $2,000 | $2,000 |
| Maximum §401(k), §403(b), §457 deferral for DC plans | $23,000 | $24,000 | $24,000 | $1,000 | $1,000 |
| Catch-up contribution limit for DC plans* | $7,500 | $8,000 Ages 60 to 63: $12,000 |
$8,000 Ages 60 to 63: $12,000 |
$500 $4,500 |
$500 $4,500 |
| Compensation limit | $345,000 | $355,000 | $355,000 | $10,000 | $10,000 |
| HCE dollar amount | $155,000 | $160,000 | $160,000 | $5,000 | $5,000 |
| Key employee/officer compensation | $220,000 | $230,000 | $230,000 | $10,000 | $10,000 |
| Contribution limit to ESAs for DC plans | $2,500 | $2,500 | $2,500 | $0 | $0 |
| Prior year wage threshold triggering Roth catch-up contributions to DC plans | $145,000 | $145,000** | $145,000** | $0 | $0 |
* Under SECURE 2.0, plans are permitted (but not required) to increase the catch-up limit for participants aged 60, 61, 62, or 63. This higher limit assumes the limit for 2025 will ultimately be based on the regular catch-up limit in 2025, as noted in draft technical corrections, instead of 2024 as passed in SECURE 2.0.
** We assumed this threshold will be indexed for inflation during the two-year transition period ending December 31, 2025.
Source: https://www.bls.gov/cpi/ retrieved May 15, 2024.
Actual 12-month trailing CPI for All Urban Consumers (CPI-U) of 3.4% ending April 30, 2024.
Actual seven-month CPI-U ending April 30, 2024, and 0.25% per month for May through September 2024.