2023 Increases for Retirement Plans, Social Security
The Social Security Administration just announced benefit increases effective in 2023. Current retirees will receive a cost-of-living increase, beginning in January 2023, of 8.7%, reflecting the increase in CPI-W between the 3rd quarter of 2021 and the 3rd quarter of 2022, the largest inflation adjustment since 1981.
In addition, the maximum amount of earnings subject to Social Security tax will increase in 2023 from $147,000 to $160,200, based on an 8.9% increase in the ‘national average wage’ during 2021.
These changes will affect benefits for currently retired individuals, as well as those contemplating retirement. Employers who sponsor retirement plans that are ‘coordinated’ with Social Security in some fashion will also see an impact on benefits earned and payable under such plans.
IRS will soon release limits applicable to retirement plans for various purposes in 2023, based on an 8.33% increase in CPI-U between the 3rd quarter of 2021 and the 3rd quarter of 2022. Based on this increase, we expect increases in most limits applicable to retirement plans in 2023. The table below summarizes our calculations for 2023, along with values for 2022 and 2021:
*Based on October Three calculations
The increase in national average wages also drives some key amounts used in calculating PBGC premiums. Relevant amounts for 2023 (along with 2022 and 2021) are summarized below:
Elements of PBGC premium calculations are indexed to increases in the national average wage. 2023 amounts reflect an 8.9% increase in the national average wage during 2021.