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2024 Plan Limits for ESOPs and Other Defined Contribution Plans Announced

In Notice 2023-75 (PDF) and an accompanying news release, the IRS announced yearly cost-of-living adjustments (COLA) of dollar limits for ESOPs and other defined contribution plans for 2024. The limits that affect ESOPs are:

  • Annual compensation limit (the amount that counts as eligible pay for allocation purposes): $345,000 (up from $330,000 for 2023)
  • Defined contribution limit for total annual additions (the maximum amount the total of employer and employee contributions to defined contribution plans): $69,000 (up from $66,000 for 2023)
  • Highly compensated definition for top-heavy rules: $155,000 (up from $150,000 for 2023)
  • Maximum account balance for the five-year distribution rule (account values over this amount in an ESOP can be distributed over periods longer than five years): $1.38 million (up from $1.33 million for 2023)
  • Annual distribution amount for extending the five-year distribution requirement (the five-year period may be extended by one year, up to a maximum of five more years, for each $275,000 that the account exceeds $1.38 million): $275,000 (up from $265,000 for 2023)
  • Maximum annual 401(k) deferral: $23,000 (up from $22,500 for 2023)
  • Catch-up 401(k) deferral for employees 50 and over: $7,500 (the same as for 2023)