25-P-021 Retirement Plan Limits for 2025
The Internal Revenue Service (IRS) Notice 2024-80 announced increased 2025 contribution limits for retirement plans. Additionally, the SECURE 2.0 Act of 2022 was signed into law on December 29, 2022. Changes to State of Kansas retirements plans are described below.
Kansas Public Employees Retirement System (KPERS)
- IRS sets a contribution limit based on annual compensation differentiated by membership date.
- Agencies should not allow KPERS contributions to be deducted 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)
- Regular Deferred Compensation Plan
- Annual limit increases to $23,500 ($23,000 in 2024) or 100% of includible compensation
- Benefit Plan 457DEF for regular before-tax plan
- Benefit Plan 457DRA for Roth after-tax plan
- This limit also applies to the plan for elected and appointed officials using the Retirement Benefit Plan V and V1.
- There are three different catch-up provisions below that cannot be used concurrently. Age is based on the participant’s age on the last day of the calendar year.
- The special catch-up limit is only available to employees who are within three years of normal retirement age. Annual limit is twice the general deferral limit and increases to $47,000 ($46,000 in 2024)
- Benefit Plan 457DER for before-tax plan
- Benefit Plan 457DRR for Roth after-tax plan
- 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 ($30,500 in 2024)
- Benefit Plan 457DEC for before-tax plan
- Benefit Plan 457DRC for Roth after-tax plan
- New for calendar year 2025, catch-up provision for 60-63 years of age
- Annual contribution limit is $11,250 ($7,500 x 150%) for 2025, making the total limit $34,750
- Benefit Plan 457DCS for before-tax plan
- Benefit Plan 457DRS for Roth after-tax plan
- The special catch-up limit is only available to employees who are within three years of normal retirement age. Annual limit is twice the general deferral limit and increases to $47,000 ($46,000 in 2024)
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.
- $500,000 maximum annual compensation multiplied by 14% contribution rate (8.5% for the employer and 5.5% for the employee) equals $70,000 (The contribution limit for “grandfathered” participants is $70,000 and the KBOR Mandatory Retirement Plan contribution rate is 14%, the dollar limit is $500,000 ($500,000 * 14% = $70,000)).
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.
- New, for 2025, is a $11,250 catch-up provision (instead of $7,500) for those who will be age 60-63 as of 12/31/25.
- Employees age 50 or over are eligible to increase their elective deferral and limit on an annual contribution by $7,500.
- As of 12/31/2025 employees age 60-63 are eligible to increase their elective deferral and limit on an annual contribution by $11,250.
- The 15-year rule may allow employees with 15 or more years of service to increase the elective deferral limit by a maximum $3,000 annual addition (total of $15,000 lifetime).
- Employees may use both the age catch-up provisions
- Age 50 or older or age 60-63
- 15-year rule concurrently
- IRS regulations state that when employees are eligible for both the 15-year rule and the age 50 or older or age 60-63 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 or older or age 60-63 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 catch-up provision (age 50 or older or age 60-63 catch-up provision amounts and 15-year catch-up 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
