25-P-017 Retirement Contribution Limits for Calendar Year 2025

The Internal Revenue Service (IRS) Notice 2024-80 announced increased 2025 contribution limits for retirement plans as follows:

Kansas Public Employees Retirement System (KPERS)

IRS sets a contribution limit based on annual compensation limit based on membership date.
Agencies should not send KPERS contributions for any earnings over the annual compensation limit.
- Membership date before July 1, 1996, annual compensation limit $520,000 (increased from $505,000 2024)
- Membership date on or after July 1, 1996, annual compensation limit $350,000 (increased from $345,000 2024)

Deferred Compensation (IRS Section 457)

457DEF (Regular Plan) [457(e)(15)]
- Annual limit increases to $23,500 ($23,000 in 2024) or 100% of includible compensation
Please note that the two different catch-up provisions below cannot be used concurrently:
- 457DER (special catch-up)
  - Annual limit increases to $47,000 ($46,000 in 2024)
  - The special catch-up limit is twice the general deferral limit and is only available to employees who are within three years of normal retirement age.
- 457DEC (catch up provision for 50 years of age or older)
  - Annual contribution limit remains the same $7,500 for 2025, making the total limit $31,000

Tax Sheltered Annuities (TSA)

The limit on annual contributions to a TSA for 2025 is the lesser of $70,000 or 100% of compensation ($69,000 in 2024). [IRS Section 415(b)(1)(A)]
The annual compensation limit used for calculating mandatory employee and employer contributions increased to $350,000 ($345,000 in 2024) and applies to the mandatory retirement plans for the School for the Blind, School for the Deaf, and Kansas Board of Regents.

School for the Blind and School for the Deaf

The maximum contribution that can be made to the plan is $35,000.
- $350,000 maximum annual compensation multiplied by 10% (5% employer contribution and 5% employee contribution)

Board of Regents

For employees starting participation after 1995, the maximum contribution that can be made to the plan is $49,000.
- $350,000 maximum annual compensation multiplied by 14% contribution rate (8.5% employer contribution and 5.5% employee contribution)
For employees starting participation prior to 1996, participants are grandfathered and use the annual compensation limit under IRS Code Section 401(a)(17) which increased from $505,000 (for 2024) to $520,000. The maximum contribution that can be made to the plan is $70,000.
- $520,00 maximum annual compensation multiplied by 14% contribution rate (8.5% for the employer and 5.5% for the employee)

Voluntary Tax-Sheltered Annuity (VTSA)

The limit on elective deferrals (Voluntary Tax-Sheltered Annuities) increases to $23,500 ($23,000 in 2024).
The age 50 or older catch-up provision remains at $7,500 in 2025.
- Employees age 50 or over are eligible to increase their elective deferral and limit on an annual contribution by $7,500.
- The 15-year rule may allow employees with 15 or more years of service to increase the elective deferral limit by an additional $3,750.
- Employees may use both the age 50 catch-up provision and 15-year rule concurrently.
- IRS regulations issued in 2003 state that when employees are eligible for both the 15-year rule and the age 50 catch-up provision, the limit on elective deferrals ($23,500 for 2025) is applied first, then the 15-year rule, and finally the age 50 catch-up provision.
The total of nonelective deferrals (the mandatory retirement plans) and elective deferral (VTSA) cannot exceed the limit on annual contributions plus the age 50 or older catch-up provision amount (if applicable).
Regents’ institutions are reminded that they are responsible for applying the maximum VTSA formulas for their employees.
Due to the complexity of the legislation and the unique circumstances of each employee, Regents’ institutions are asked to contact the 403(b) carriers to aid in any questions regarding the VTSA plans.

NR: SGZ:cmc