The maximum contribution that can be made to 401(k) plans will increase next year, as will the maximum benefit that can be funded through defined benefit plans, the Internal Revenue Service announced Oct. 18.
The maximum annual contribution an employee can make through salary reduction to a 401(k) plan will rise to $17,500 in 2013, up from $17,000 this year. The maximum catch-up contribution employees age 50 and older can make to 401(k) plans will be $5,500, unchanged from 2012.
In addition, the maximum annual benefit that can be funded through a defined benefit plan for a plan participant will increase to $205,000 from $200,000.
The IRS also said the amount of employee compensation that can be considered in calculating pension benefits and contributions to defined contribution plans will rise to $255,000 from $250,000.
Additionally, the definition of a highly compensated employee for 401(k) plan nondiscrimination testing purposes will be one who earns at least $115,000 next year, unchanged from 2012.
The 2013 limits, which reflect a methodology set by federal law, are based on increases in the cost of living.