2025 Inflation Adjustments for Pension Plans, Retirement Accounts Released, Notice 2024-80; IR-2024-285

The 2025 cost-of-living adjustments (COLAs) that affect pension plan dollar limitations and other retirement-related provisions have been released by the IRS. In general, many of the pension plan limitations will change for 2025 because the increase in the cost-of-living index due to inflation met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged.

The SECURE 2.0 Act (P.L. 117-328) made some retirement-related amounts adjustable for inflation beginning in 2024. These amounts, as adjusted for 2025, include:

• The catch up contribution amount for IRA owners who are 50 or older remains $1,000.
• The amount of qualified charitable distributions from IRAs that are not includible in gross income is increased from $105,000 to $108,000.
• The dollar limit on premiums paid for a qualifying longevity annuity contract (QLAC) is increased from $200,000 to $210,000.

Highlights of Changes for 2025

The contribution limit has increased from $23,000 to $23,500. for employees who take part in:

• -401(k),
• -403(b),
• -most 457 plans, and
• -the federal government’s Thrift Savings Plan

The annual limit on contributions to an IRA remains at $7,000. The catch-up contribution limit for individuals aged 50 and over is subject to an annual cost-of-living adjustment beginning in 2024 but remains at $1,000.

The income ranges increased for determining eligibility to make deductible contributions to:

• -IRAs,
• -Roth IRAs, and
• -to claim the Saver’s Credit.

Phase-Out Ranges

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. The deduction phases out if the taxpayer or their spouse takes part in a retirement plan at work. The phase out depends on the taxpayer’s filing status and income.

• -For single taxpayers covered by a workplace retirement plan, the phase-out range is $79,000 to $89,000, up from between $77,000 and $87,000.
• -For joint filers, when the spouse making the contribution takes part in a workplace retirement plan, the phase-out range is $126,000 to $146,000, up from between $123,000 and $143,000.
• -For an IRA contributor who is not covered by a workplace retirement plan but their spouse is, the phase out is between $236,000 and $246,000, up from between $230,000 and $240,000.
• -For a married individual covered by a workplace plan filing a separate return, the phase-out range remains $0 to $10,000.

The phase-out ranges for Roth IRA contributions are:

• -$150,000 to $165,000, for singles and heads of household,
• -$236,000 to $246,000, for joint filers, and
• -$0 to $10,000 for married separate filers.

Finally, the income limit for the Saver’ Credit is:

• -$79,000 for joint filers,
• -$59,250 for heads of household, and
• -$39,500 for singles and married separate filers.

Notice 2024-80

IR-2024-285