On November 1, the IRS announced its annual cost-of-living allowance (COLA) increases to plan limits for 2025, which are provided in detail in Notice 2024-80 (PDF). The most important figures for ESOPs are:
- The elective deferral limits for 401(k) plans increases from $23,000 (for 2024) to $23,500 (for 2025).
- The annual catch-up contribution for 401(k) plans remains at $7,500.
- The Section 415 limit on annual additions increases from $69,000 to $70,000.
- The definition of “highly compensated employee” increases from $155,000 to $160,000.
- The annual compensation limitation on eligible pay increases from $345,000 to $350,000.
- The maximum account balance in an ESOP subject to a five-year distribution increases from $1,380,000 to $1,415,000, and the dollar amount used to determine the lengthening of the five-year distribution period increases from $275,000 to $280,000.