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IRS Increases Deferred Compensation Contribution Limits for 2023
The Internal Revenue Service announced that the dollar amounts participants may contribute to tax-deferred savings plans, such as the Commonwealth of Virginia 457 Deferred Compensation Plan, will increase for tax year 2023, which begins January 1.
| Commonwealth of Virginia 457 Deferred Compensation Plan Contribution Limits | 2023 |
|---|---|
| Annual deferral limit for participants younger than 50 | $22,500 |
| Pre-retirement Standard Catch-Up (not to exceed participant’s catch-up credit) | $22,500 ($45,000 total) |
| Age 50+ Catch-Up Limit | $7,500 ($30,000 total) |
How to change contributions: To increase Commonwealth of Virginia 457 Plan contributions effective the first pay period of 2023, participants should log in to their online account by 4 p.m. December 31.
Participants cannot use the Age 50+ Catch-Up and the Standard Catch-Up in the same calendar year. For more information on the Age 50+ Catch-Up, Standard Catch-Up, military leave make-up, one-time deferrals or investment options, refer participants to the Contributions section of the Commonwealth of Virginia 457 Deferred Compensation Plan website.
The annual limit includes any voluntary contributions that Hybrid Retirement Plan members make to the Hybrid 457 Deferred Compensation Plan and any other supplemental 457 plans. Any Roth after-tax or pre-tax contributions made to the Commonwealth of Virginia 457 Deferred Compensation Plan also count toward the limit.
Employers need to monitor members’ contributions and stop all 457 contributions and the employer match once the limit is reached. A contribution limit report is accessible in EZLink. If you identify a member who has exceeded the limit, email dcplans@varetire.org.
IRS increases 2023 annual compensation limits for creditable compensation:
- Employees with membership dates before April 9, 1996: $490,000
- Employees with membership dates on or after April 9, 1996: $330,000
Income over the amounts provided cannot be considered part of an employee’s creditable compensation in VRS retirement plans. If an employee’s annual salary exceeds the 401(a)(17) compensation limit, myVRS Navigator automatically calculates creditable compensation and contributions using the limit. Employers should report the employee’s actual salary. Do not withhold the member contribution on the excess salary from the employee. Instead, pay it to the employee as wages. Other VRS benefits, such as life insurance, are based on the full, uncapped annual salary.
Although IRS compensation limits are announced as effective for January 1, VRS applies the limit on a plan-year basis (July 1 to June 30).
