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IRS Increases 2025 Limits for Tax-Deferred Saving
The Internal Revenue Service announced that the dollar amounts participants may contribute to tax-deferred savings plans will increase for tax year 2025, which begins January 1.
| 2025 Deferred Compensation Plan Contribution Limit | 2025 |
|---|---|
| Annual deferral limit for participants younger than age 50 | $23,500 |
| Standard catch-up (not to exceed participant’s catch-up credit) | $23,500 |
| Age 50+ catch-up | $7,500 |
| Super catch-up (Ages 60-63)* | $11,250 |
* The super catch-up contribution provision in the SECURE 2.0 Act of 2022 takes effect in 2025.
The annual limit applies to:
- Voluntary contributions that Hybrid Retirement Plan members make to the Hybrid 457 Deferred Compensation Plan.
- Contributions made to other supplemental 457 plans.
- Roth after-tax or pretax contributions made to the Commonwealth of Virginia 457 Deferred Compensation Plan.
- Participants cannot use the Age 50+ Catch-Up and the Standard Catch-Up in the same calendar year.
Employers need to monitor members’ contributions and stop all 457 contributions and the employer match once they reach the limit. If you identify a member who has exceeded the limit, email dcplans@varetire.org.
2025 Annual Compensation Limits Increase
| Membership Date | 2025 Limit |
|---|---|
| Before April 9, 1996 | $520,000 |
| On or after April 9, 1996 | $350,000 |
If an employee’s annual salary exceeds the IRC § 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 and effective for January 1, VRS applies the limit on a plan-year basis (July 1 to June 30).
