The initial edition of our forecast includes how the limits are calculated and why they may be relevant for plan sponsors.
Our initial forecast in April 2022 can be found here, and includes information about the limits for qualified retirement plans, how these limits are calculated, and why they may be relevant for certain plan sponsors.
June 2022 forecast
Inflation in the 12 months ending June 30, 2022, was 9.1% as reported by the BLS on July 13, 2022. This consumer price index (CPI) measure compares to the 8.6% CPI reported for the 12 months ending May 31, 2022.
With only three months remaining for federal fiscal year (FFY) 2022, our 2023 IRS limits forecast will most likely set the record for a one-year increase, in terms of both dollars and percentage, even if inflation transitions to 3.0% annually (0.25% per month) for July through September 2022. See the table on page 2.
All the values in both columns 2 and 3 in this forecast are now identical. Two of the six values in the apocryphal forecast in column 2 increased, while five of the six values in the low-end forecast in column 3 increased from the low-end forecast in the May 2022 publication. Those values that increased from the May forecast are in bold in the table.
Further, for July 2022 through September 2022, we have estimated that monthly CPI increases of zero to about 1.00% (about 12.0% annualized) will produce the same forecast limits as in column 3. The CPI would need to be greater than 1.0% per month in each of the three months for the values to increase to the next rounded limit (as prescribed by IRS methods).
While there is no certainty to the forecast, it is highly likely with only three months remaining in federal fiscal year 2022, that, for 2023:
- The compensation limit will increase to at least $335,000 ($30,000 more than in 2022)
- The highly compensated employee (HCE) dollar limit will increase to at least $150,000 ($15,000 more)
- The individual elective contributions limit will increase to at least $22,500 ($2,000 more)
- The sum of individual and employer contribution limits will increase to at least $67,000 ($6,000 more)
- The catch-up contribution limit will increase to at least $7,500 ($1,000 more)
- The defined benefit (DB) plan annuity limit will increase to at least $265,000 ($20,000 more)
BLS is expected to release the July CPI results on August 10, 2022, at which time this forecast will be revised.
If you have any questions, please contact your Milliman consultant.
Figure 1: 2023 IRS limits forecast using actual federal fiscal year 2022 CPI as of June 30, 2022
| 2022 IRS limits | Estimated 2023 IRS limits | Dollar increase from 2022 IRS limit | |||
| Category of Annual IRS limits | Actual 12 month trailing CPI as of 6/30/22 |
9 month actual 6/30/22, 3 months forecast to 9/30/22 |
Actual 12 month trailing CPI as of 6/30/22 |
9 month actual 6/30/22, 3 months forecast to 9/30/22 |
|
| Compensation limit | $305,000 | $335,000 | $335,000 | $30,000 | $30,000 |
| HCE dollar amount | $135,000 | $150,000 | $150,000 | $15,000 | $15,000 |
| Individuals' elective contributions to savings plans | $20,500 | $22,500 | $22,500 | $2,000 | $2,000 |
| Individuals & employer's elective contributions to savings plans | $61,000 | $67,000 | $67,000 | $6,000 | $6,000 |
| Catch-up contributions for age 50 and over | $6,500 | $7,500 | $7,500 | $1,000 | $1,000 |
| DB annuity at age 65 | $245,000 | $265,000 | $265,000 | $20,000 | $20,000 |
Source: https://www.bls.gov/cpi/ retrieved July 13, 2022
Actual 12 month CPI-U of 9.1% ending June 30, 2022
Actual 9 month CPI-U ending June 30, 2022 and 0.25% per month for July through September 2022