New IRS Indexed Limits for 2023

WASHINGTON — The Internal Revenue Service has announced that employees in 401(k) and 403(b) plans will be able to contribute up to $22,500 next year. The IRS announced this and other changes in Notice 2022-55, posted on This guidance provides cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2023.

Highlights of Changes for 2023

The limit on contributions by employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan changed to $22,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans increased from $6,500 to $7,500 for 2023.

The annual compensation limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increased to $330,000 from the 2022 limit of $305,000.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2023.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase‑out ranges for 2023:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $73,000 and $83,000, up from between $68,000 and $78,000.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $116,000 and $136,000, up from between $109,000 and $129,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000. For married couples filing jointly, the income phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $73,000 for married couples filing jointly, up from $68,000; $54,750 for heads of household, up from $51,000; and $36,500 for singles and married individuals filing separately, up from $34,000.

Key employee contribution limits Increase for 2023

The limit on annual contributions to an IRA increased from $6,000 to $6,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.


Are You Aware of The New SECURE Act Provisions?

Aegis Retirement Partners is dedicated to keeping our clients up-to-speed on all of the latest SECURE Act news. Here’s the latest:

The SECURE ACT (Setting Every Community Up for Retirement Enhancement) was signed into law on December 20, 2019.  Recent CARES Act legislation passed to deliver relief to those impacted by Covid-19 may have upstaged the SECURE Act, but it is important to be aware of the new provisions.

Automatic Enrollment Deferral Limits Increase

Automatic enrollment (AE) plans were first introduced to plan sponsors in the Pension Protection Act (PPA) legislation passed back in 2006.  The popularity and utilization of automatic enrollment among 401(k) Plans continues to grow, and resulted in positive improvements in plan usage.

Under PPA, the maximum automatic enrollment deferral escalation was 10%.  The SECURE Act increases the cap to 15% of eligible compensation.  Plan Sponsors may take advantage of the new “maximum” cap for plan years beginning after 12/31/19.

Safe Harbor Adoption Timing Changes

A safe harbor plan is a great solution for Plan Sponsors looking to eliminate problems caused by testing failures.  One challenge, however, has been to identify potential testing issues early, because safe harbor plans are required to be adopted at least 30 days prior to plan year-end.  For testing problems identified after the end of a year, there has been no relief, until now!

To eliminate testing problems, The SECURE Act legislation permits Plan Sponsors to adopt a 4% nonelective safe harbor contribution as late as 12 months after the plan year ends.  It is important to clarify that this is not a safe harbor “match,” the 4% contribution must be made to all eligible plan participants.

Changes to Minimum Required Distributions (MRD)

The SECURE Act changed the age for MRD to Age 72. This regulation goes into effect on 01/01/2020. Participant’s under age 70.5 prior to 01/01/2020 will not be required to take their minimum required distribution until they attain 72 years of age.

If a participant is age 70.5 or older prior to 01/01/2020, and has already taken a MRD’s in a prior year, they are required to continue taking minimum required distributions (2020 CARES Act exemption not-withstanding).  Participant’s born after 07/01/1949 are subject to the new age 72 regulation.

Upcoming as of 01/01/2021– Long-term part-time employees will have a coverage requirement

This provision of the SECURE Act legislation is meant to provide some retirement plan access to long-term part-time employees who might otherwise be completely excluded from participation by the plan’s eligibility rules.

Beginning in 2021, employees who complete at least 500 hours of service for three consecutive eligibility (calendar year) periods are called “long-term part-time employees.”  Long-term part-time employees may not be excluded from making employee deferrals.  While they must be permitted to make deferrals, they may be required to meet traditional eligibility rules in order to qualify for any employer contributions.

If long-term part-time employees are permitted to receive employer contributions, separate vesting rules will apply using a 500-hour rule, instead of the traditional 1,000-hour requirement, which will require additional administrative & recordkeeping support for tracking.

Since the initial tracking period for long-term part-time employees begins in 2021, the first coverage period will not happen until 2024 (third consecutive eligibility period).

Withdrawal for birth or adoption of a child

The SECURE Act established a new form of distribution after 12/31/2019 for expenses related to Birth or Adoption of a Child.  The distribution must be taken within 1 year of the birth/finalization of an adoption. The maximum distribution amount is $5,000. This new provision applies to Defined Contribution, 401(k), 403(b), 457(b), Gov’t 457, and IRA’s.  The distribution would be exempt from the 10% excise tax penalty traditionally enforced on premature distributions.

Adoption of a Qualified plan up to tax return timeline change

The SECURE Act increases the length of time Employers may adopt a qualified plan and still deduct contributions, up to the due date of the employer’s tax return, including extensions.  Contributions are limited to employer contributions only, (no employee deferrals) prior to the adoption date of the plan.

Tax benefits for startups

The SECURE Act increased the Small Employer Startup Credit to entice more Small Employers (less than 100 employees) to sponsor a qualified retirement plan.  The new credit is the lesser of 50% of startup costs, the greater of $500, or the lesser of $250 times the number of Non-Highly Compensated Employees (NHCE), or $5,000.  The calculation is complicated, but here is an example:

A startup company with 30 Non-Highly Compensated Employees and startup costs of $12,000

Step 1. 30 NHCE’s X $250 = $7,500

Step 2. Lesser of Step 1 or $5,000 = $5,000

Step 3. Greater of Step 2 or $500 = $5,000

Step 4. Lesser of Step 3 or 50% of start-up costs = $5000


Please consult with your tax professional for additional details.

Updated Penalties

The IRS has increased its penalties for late filings.

  • Form 5500- increased from $25/day to $250/day, capped at $150,000
  • Form 8955-SSA- increased from $1/day to $10/day per participant, capped at $50,000
  • Withholding notice – increased from $1/day to $10/day per participant, capped at $50,000

The SECURE ACT clearly has a significant impact on the retirement world, and has broadened several plan provisions to add flexibility for plan sponsors.

Aegis Retirement Partners strives to provide the best customer service and the strongest plan design to our clients. If you are interested in more information on the SECURE Act, and what the new regulations will mean for you, please reach out to your dedicated account manager.

Partial Plan Terminations? Important Information For Plan Sponsors From Aegis Retirement Partners

With an increasing number of businesses currently being affected by the COVID-19 Pandemic, Plan Sponsors are facing new challenges. Many sponsors are taking unfortunate, but necessary steps to weather these events, such as suspending or reducing employer contributions, or laying off and furloughing employees. As a result, Partial Plan Terminations are becoming more common. If you are a Plan Sponsor who offers an employer contribution which is subject to a vesting schedule, there are important rules you should be aware of.

What is a Partial Plan Termination?

Though the Internal Revenue Code does not specifically define what constitutes a Partial Plan Termination, the Internal Revenue Service (IRS) will examine each case by the facts and circumstances looking for a significant reduction in the number of participants in the plan.

The two main factors that the IRS uses to make its determination are:

  • Percentage of reduction in participants
    • If the reduction is over 40%, it should be presumed that a partial plan termination has occurred.
    • If the reduction is less than 40%, but at least 20%, there is a rebuttable presumption that a partial plan termination has occurred. This determination has come down on both sides of the line.
    • If the reduction is less than 20%, there is a rebuttable presumption that a partial plan termination has not occurred.
  • Facts and Circumstances
    • Who is involved (vested and non-vested participants)?
    • Who initiated the terminations and what was the reason?
      • Even if an employee voluntarily terminated, they may still be counted toward the 20% benchmark if they did so with the belief they were going to be terminated.
    • What is the period of time?
    • Other significant facts or circumstances.


Consequences to a Partial Plan Termination

If your plan is deemed to have a Partial Plan Termination, all affected participants become immediately 100% vested in their funded benefits.


Why can this be an issue?

If an affected participant received a distribution from the plan prior to the determination, they may have been paid out with a portion of their employer contribution balance improperly forfeited.

These forfeited amounts, which may have been utilized to reduce employer contributions, or pay plan related expenses, are now due to the participant along with potential earnings assessed through the Employee Plans Compliance Resolution System (EPCRS).  See Fixing Common Plan Mistakes –  Vesting Errors in Defined Contribution Plans for more information.

What can be done to make sure this is handled the right way?

There are two widely accepted options:

  1. Immediately 100% vest all participants utilizing EPCRS for any participant affected with prior termination dates, and ensure that proper distributions are processed.
  2. Seek IRS determination. The IRS will review the relevant facts and circumstances to determine whether a partial plan termination has occurred. This involves filing the Form 5300, which also has a IRS filing fee, along with any preparation fees to your plan provider.

Are there any special changes or exemptions due to the COVID-19 Pandemic?

As of the date of this writing, there is no special relief due to COVID-19.

Many employers have asked whether rehiring all the participants who were laid off means a partial plan termination can be reversed. There are arguments for both sides of this issue. The conservative approach would be to fully vest participants, understanding the cost of doing so would be to forgo any forfeitures of non-vested employer contribution accounts, and follow EPCRS guidance if necessary.

Partial Plan Terminations can be very confusing, and the regulations surrounding them are vague.  Luckily, you are not alone. By engaging with your Third Party Administrator, Legal Counsel, and Tax Advisor, you can determine whether or not you have had a partial plan termination.  At Aegis Retirement Partners, we will work directly with our clients to ensure that whatever action is taken is appropriate in light of current legislation.

This document provides general information and shouldn’t be considered recommendations or legal advice.

For additional information, please visit the IRS website at

Helping Retirement Savers Affected by COVID-19

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed into law. The CARES Act is intended to deliver immediate relief to companies and individuals adversely affected by the pandemic COVID-19. Several provisions in the new law impact qualified retirement plans 401(k)/403(b), Gov’t 457, IRA’s, resulting in new withdrawal and repayment options, excise tax relief, and repayment holidays for new and existing plan loans.

What is the new withdrawal option provided by the CARES Act?

The corona-virus related distribution, referred to as a COVID-19 distribution, is the new withdrawal option included in the CARES Act legislation. COVID-19 distributions are intended to deliver immediate financial relief to participants negatively affected by the Coronavirus by permitting plan withdrawals subject to certain limits.

The COVID-19 distribution is unique because it comes with potential repayment options, relief from excise tax penalties, and flexibility on the timing of income tax payments. Participants must be qualified individuals to take advantage of the special provisions included in the CARES Act. Plan Sponsors must amend their plans to include the relief provisions designed in the CARES Act.

Who is a Qualified Individual?

A qualified individual is one who:

Was diagnosed with COVID-19 by a CDC recognized test.

Has a spouse or dependent diagnosed with COVID-19

Experienced adverse financial consequences as a result of being:

o Quarantined

o Furloughed or laid off

o Reduced work hours

o Unable to work due to lack of childcare as a result of COVID-19

o Reduced work hours due to the COVID-19 diagnosis of a business owner


COVID-19 Distributions

Are there limits to how much qualified individuals may request as a COVID-19 distribution?

Yes, there are limits. COVID-19 distributions may be as high as 100% of your vested account balance,

with a maximum withdrawal amount capped at $100,000. COVID-19 distributions must be taken on or before December 30, 2020.


Are there limits to the number of COVID-19 distributions qualified individuals may request?

No, if total COVID-19 distributions do not exceed $100,000 or 100% of the participants vested account balance, you can request as many COVID-19 distributions as you need including multiple plans/IRA’s.


Are COVID-19 distributions subject to taxes and/or penalties and if so when are they due?

A COVID-19 distribution is subject to ordinary income taxes unless it’s a qualified Roth withdrawal. It is NOT subject to excise tax (10%) penalties. COVID-19 distributions deliver flexibility on the timing of federal income tax payments. Guidance on state income taxes has not been provided so the following information pertains to federal income taxes only:

As a qualified individual, you may elect to receive COVID-19 distributions with no federal income taxes withheld. Normally, 20% must be withheld for federal taxes. The entire distribution will be subject to federal and applicable state income taxes at a future date.

Normally, distributions are subject to ordinary income tax during the applicable calendar year. But, if you need additional financial relief, you can elect to spread income tax payments over a three-year period. For illustration purposes let’s assume the COVID-19 distribution is $12,000, it is received in April 2020 and no monies have been withheld for taxes, here are your options:

Option 1. The COVID-19 distribution may be treated as ordinary income subject to federal and applicable state taxes in the year of the distribution (2020). Taxes on the $12,000 COVID-19 distribution will be payable on or before April 15, 2021 unless extensions apply.

Option 2. You may elect to spread income taxes on you $12,000 COVID-19 distribution over the next three years to reduce the amount of taxes due on or before April 15, 2021.

Your federal and certain state income taxes would include payment on one-third of the total distribution each year. Income tax on $4,000 ($12,000/3) resulting from the COVID-19 distribution will be due in 2020, 2021 and 2022.


Can I repay my COVID-19 distribution as soon as my financial situation improves?

YES! This is one of the most innovative features included in the CARES Act because qualified individuals who need money “now” for financial emergencies can get it and repay their accounts within a certain time frame to avoid taxation. This critical feature enables savers to keep their “nest eggs” intact and growing for their future retirement income needs. COVID-19 distributions are designed to provide immediate relief for what everyone hopes will be a temporary financial crisis.

You can repay COVID-19 distributions to your plan or IRA entirely or partially up to three years beginning on the day after you receive the distribution.

Here are some examples of receiving a $12,000 COVID-19 distribution on April 30, 2020:

On or before December 30, 2020 you may elect to repay the entire distribution back to the retirement plan or IRA to avoid paying income tax on the entire distribution in 2020.

If you need additional time to repay your account, you may choose to recognize 1/3 of the income over three years in equal payments. In this example, that means paying back $4,000 per year.

Any portion of the distribution you pay back in each tax year by the due date for filing (including extensions) reduces your taxable income for that year. Therefore, if in 2020, if you only repay $1,500, then $2,500 of income is subject to income tax in 2020 [$4,000-$1,500]. Special tax forms will be required to be filed and you should coordinate with a tax professional.

Special Note: If in 2021 or 2022 you make repayments in excess of $4,000, the excess amount can be used to adjust your 2020 income tax by filing an amended income tax return.


Loan Policy Changes

Does the CARES Act deliver relief for qualified individuals with existing loans or those who need additional loans?

YES! The CARES Act includes payment relief to qualified individuals with existing outstanding loans as well as additional loan capacity to reduce short term financial burdens.

These provisions deliver “relief”, but they do not eliminate or waive loan repayments entirely. Each provision requires Plan Sponsor approval and amendments which are considered on a plan by plan basis. Please contact your plan administrator to learn what options are available. The loan provisions are complicated, you are strongly encouraged to consult with your financial advisor and/or tax professional for assistance.

1. Loan Limits- The CARES Act loan limits for qualified individuals have been increased to the lesser of 100% of vested account balance or $100,000.

Plan Participants who are not “qualified individuals” are subject to traditional IRS loan limits which are the lesser of 50% of vested account balance or $50,000 respectively.

2. Loan Repayment Relief- The CARES Act provides a payment holiday for qualified individuals with existing loans of up to one year. Interest on all loans continues to accrue while payments are suspended, but the payment grace period offers participants a better chance to recover from the COVID-19 economic crisis. Here are some scenarios;

a. As a qualified individual and Plan Participant, you may request a loan in April 2020. Interest on the loan begins to accrue immediately. However, loan repayments will not start until April 2021.

b. Qualified individuals with outstanding loans may request to have their loan repayments suspended immediately for up to one year. When payments commence, the additional interest accrued will be amortized and added to your remaining payment schedule. For example, if you have three years of loan payments left, you will still have three years of loan payments this time next year.

3. Loan Defaults- Loans that are not fully repaid will become taxable and may be subject to the 10% early withdrawal penalty if defaults occur after December 30, 2020.


Common Plan Withdrawal Options

Does the CARES Act impact common “in-service” withdrawals?

NO The CARES Act has no effect on in-service withdrawal plan features. However, you should plan carefully if you have been impacted by COVID-19 because alternative distributions may be more favorable.

In-service withdrawals typically apply to actively employed participants who are age 59 1/2 or older. Not all plans offer these options. In-service withdrawals are subject to ordinary income taxes excluding qualified Roth distributions. But, they are not subject to IRS 10% early withdrawal penalty.

All in-service distributions are subject to mandatory income tax withholding (20% federal), and applicable state income taxes.

All in-service withdrawals are subject to taxes in the calendar year of the distribution.


Does the CARES Act impact Hardship Withdrawal?

NO The CARES Act has no effect on plan hardship withdrawals. However, you should plan carefully because alternative distribution methods may be more favorable.

Hardship withdrawals are only available to actively employed participants. The amount of the hardship is limited to what is required to satisfy very limited financial needs, for example, to prevent eviction or mortgage foreclosure from your primary residence. This is a taxable distribution subject to the  except in certain medical circumstances.

At the time of hardship distribution, a participant may elect to have NO federal or state income tax withheld. Absent an election, a default 10% federal tax and any applicable state income tax are required to be withheld.

Any hardship withdrawal is subject to ordinary income taxes plus excise tax penalty if applicable in the year of distribution.


Does the CARES Act impact Termination of Employment Withdrawals?

NO The CARES Act has no effect on terminated employees. Former employees may request their account balance anytime. If they are qualified individuals, they may avoid current taxation and penalties as described above. If they are not qualified individuals, distributions will continue to be subject to ordinary income tax and excise tax penalty if applicable as well as mandatory IRS withholding

Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is Now Law

On Friday March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act is a stimulus package that provides financial relief to businesses and individuals during this unprecedented pandemic.

You can access the CARES Act in its entirety (800 pages) through the link provided at the end of this document. However, the paragraphs below outline the components that pertain solely to your retirement plan, and how Aegis is facilitating the necessary compliance for our clients.

1. COVID-19 Withdrawal: This is a NEW distribution option that deals specifically with the coronavirus. This new distribution is available immediately to a participant who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19); whose spouse or dependent is diagnosed with such virus; who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off or having work hours reduced due to such virus; being unable to work due to lack of child care due to such virus; or closing or reducing hours of a business due to such virus. A participant may take a distribution of up to the lesser of 100% of their vested account balance or $100,000. Unlike most distributions taken under the current hardship distribution rules, the 10% early withdrawal penalty DOES NOT apply to this distribution.

Two additional features meant to reduce the financial tax impact of this withdrawal have been included in the CARES Act.

  1. Unlike hardship withdrawals where the taxation applies in the year the withdrawal is taken, taxation for this distribution can be spread out over 3 year.
  2. If elected, participant withdrawals may be repaid PRETAX all or in-part within 3 years from the date of the withdrawal.

Notably, prior distributions taken since January 1, 2020 will qualify for this favorable tax treatment if all other conditions above are met. Finally, no documentation is required. A participant can “SELF-CERTIFY” that they are eligible for the withdrawal.

2. Participant Loans: The CARES Act enhances loan provisions; they apply to existing loans as well as to any new loan taken. The maximum amount that may be taken as a loan is now the lesser of $100,000 (previously $50,000) or 100% (previously 50%) of a participants vested account balance. If a participant meets the qualifications for a COVID-19 withdrawal (from #1 above), repay ments may be SUSPENDED for one year. Interest that accrues on the loan will simply be added to the outstanding loan balance and the payment will be re-amortized by adding on 1 additional year to the original loan end date. These repayment changes are OPTIONAL and may be applied on a participant by participant basis.

3. Required Minimum Distributions: Required minimum distributions (aka Age 70 ½ or 72 distributions, depending when the participant was required to begin taking) in 2020 are WAIVED. If a participant has already taken their 2020 required minimum distribution, this distribution is now eligible to be rolled over to an IRA or an eligible retirement plan (your Plan) if it can be rolled over within 60 days of the distribution.

When Aegis sponsors your Plan document, we prepare the necessary amendments to ensure compliance with any changes from Washington. All plans will need to be amended no later than the last day of 2022 Plan year. We are working closely with our record keeping partners to ensure the features included in the CARES Act can be accommodated on their systems as soon as possible.

Please let us know if you have any questions. We will get through this crisis, we always do. In the meantime, thank you for your support, please stay safe and be healthy.

The complete CARES Act is located at: