The contribution limits for retirement plans are something every individual or plan sponsor should be aware of. On November 1st, the IRS announced changes to retirement plans for 2025.
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased to $23,500. Limits on contributions to traditional and Roth IRAs remains $7,000.
Fiduciary Financial Partners created this 2025 Contributions for Retirement Plans chart for educational and informational purposes only. It is not intended as ERISA, tax, legal or investment advice.
But that’s not all. Recent updates brought by the SECURE Act 2.0 have introduced significant changes to the 401(k) landscape, making it even more important to stay informed.
Key Highlights of SECURE 2.0
401(k) Hardship Withdrawals
Employees can now take one penalty-free 401(k) distribution per year of up to $1,000 for medical, funeral, or tuition-related expenses, provided they meet the IRS’s "immediate and heavy financial need" criteria. Employees have the option to repay this amount within three years.Part-Time Worker Eligibility
Part-time employees now need only two consecutive years of working 500-999 hours to become eligible for a company 401(k) plan, down from the previous requirement of three years.Expanded Tax Credits for Small Employers
Small businesses with 50 or fewer employees can receive a tax credit covering 100% of the cost of setting up a retirement plan, starting in 2023. Employers with up to 100 employees may also receive a lesser credit based on contributions.Required Minimum Distributions (RMDs)
The mandatory age for RMDs has increased to 73 in 2023 and will further rise to 75 in 2033, giving individuals more flexibility to delay withdrawals from their retirement accounts.Roth IRA Matching for Employer Plans
Employers can now offer matching contributions to Roth accounts. However, it may take time for plan providers and payroll systems to implement this change.Automatic Enrollment in Retirement Plans
Beginning in 2025, employers must automatically enroll employees in 401(k) or 403(b) plans unless they opt out. Small businesses with fewer than 10 employees, churches, and government plans are exempt.Increased Catch-Up Contributions
Starting in 2025, individuals aged 60 to 63 can contribute an additional $10,000 annually to their 401(k) plans, compared to the current $7,500 limit.
How These Changes Impact You
The SECURE 2.0 Act introduces enhancements that aim to make retirement savings more accessible and adaptable for both employees and employers. From expanded eligibility for part-time workers to increased tax credits for small businesses, these changes provide opportunities to optimize retirement strategies for all involved.
Our Commitment to Your Retirement Success
Fiduciary Financial Partners created this 2025 Contributions for Retirement Plans chart for educational and informational purposes only. It is not intended as ERISA, tax, legal, or investment advice.
If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
Fiduciary Financial Partners is an independent advisory firm with the goal of making the world a better place one plan, one participant at a time. As our client's Chief Retirement Officer, an extension of your team focused solely on the Plan and the Plan's participants, we hope to provide helpful information so that you can confidently make decisions that affect employer-sponsored retirement plans.
For a deeper conversation on these issues, contact Fiduciary Financial Partners directly at 630.780.1535 or 401k@fiduciaryfp.com.