Cyber for Plan Sponsors

2023’s Coming: Contribution Limits



Though many of us are still wondering where August went, we’re actually closer to New Year’s 2023 then Labor Day 2022. The government has announced the contribution limits for elective deferrals to retirement accounts for 2023—and more. Here’s what retirement plan sponsors need to know—and do.


Defining the Terms

Serving as the plan sponsor of a retirement account is all about loving the details–including the terminology. In gearing up for the year ahead, it’s a good idea for plans sponsors to refresh knowledge on terms like “elective deferral limit,” “annual benefit limit” and “annual contribution limit.” Here’s a handy summary from Plan Sponsor:


The Elective Deferral Limit is the maximum contribution that can be made on a pre-tax basis to a 401(k) or 403(b) plan (Internal Revenue Code section 402(g)(1))….


The Annual Benefit Limit is the maximum annual benefit that can be paid to a participant (IRC section 415). The limit applied is actually the lessor of the dollar limit above or 100% of the participant’s average compensation (generally the high three consecutive years of service)….


The Annual Contribution Limit is the maximum annual contribution amount that can be made to a participant’s account (IRC section 415). This limit is actually expressed as the lessor of the dollar limit or 100% of the participant’s compensation, applied to the combination of employee contributions, employer contributions and forfeitures allocated to a participant’s account.


Keep in mind that the participant compensation level is also subjected to the Annual Compensation Limit: “In calculating contribution allocations, a plan cannot consider any employee compensation in excess of the Annual Compensation Limit (401(a)(17)). This limit is also imposed in determining the Annual Benefit Limit (above).” Further details and definitions related to contribution limits are available right here. Plan sponsors are reminded that they have a continuous responsibility to monitor service providers. A provider error can easily result in a fiduciary breach allegation, and only fiduciary liability insurance protects plan sponsors in the event of mistakes carrying out their duties. Absent coverage, even a mere accusation of a fiduciary breach can prove ruinous, with defense typically costing over $600 per hour. Insurance is critical: Fiduciary-Cyber Liability Insurance HERE.


Numbers To Know

Summarizing the maximum benefit and contribution limits established by the Internal Revenue Service (IRS) for 2023, Plan Sponsor reports:


  • Elective Deferrals (401k & 403b plans): $22,500 (up from $20,500 in 2022).


  • Annual Benefit Limit: $265,000 (up fro $245,000 in 2022).


  • Annual Contribution Limit: $66,000 (up from $61,000 in 2022).


  • Annual Compensation Limit: $330,000 (up from $305,000).


Catch up Contributions, which allow eligible individuals age 50 and over to put additional funds in retirement accounts are set at $7,500 for 2023—a $1,500 increase from 2022. View the full details on all contribution protocols compared over a six year period right here. With so much to attend to, even the most diligent plan sponsor can make mistakes. That’s why protection is a best practice, and Colonial Surety makes it easy, speedy—and affordable. Our packages, available with a commitment of anywhere from 1-3 years, offer the best value and coverage. Packages include:


  • Legal defense and coverage for penalties against claims of alleged or actual breaches of fiduciary duties—up to $1,000,000.
  • Defense against lawsuits and regulatory actions related to a cyber breach.
  • Expert-led response, notification and crisis management services to prevent a cyber incident from spiraling into a disaster.


Colonial makes it so fast and reasonable for plan sponsors to secure all this protection, that you can obtain yours in minutes now: Fiduciary-Cyber Liability Package.



Pension plan professional? We’re here to help you with your plan sponsor clients—and we’ve got you too. From  Errors and Omissions Insurance to Fiduciary Liability Insurance, Employment Practices Liabiity Insurance–and more, we’re HERE with the coverages pension professionals need to keep the business going—and growing. Insurance for Pension Professionals Right Here.


Colonial Surety was founded in 1930 and continues giving customers the assurance that they, their businesses, and their clients are safeguarded with the right surety and insurance products at all times. We are a direct and digital insurer offering products through an online platform supported with exemplary customer service. We give customers a simple, direct, and instant service that takes the pain out of buying insurance and bonds. Colonial Surety is licensed in every state in the U.S., rated “A” Excellent by A.M. Best, and listed by the U.S. Treasury as an approved surety.