Rev. Rul. 2022-24: Covered compensation tables for 2023 plan year

For purposes of determining covered compensation for the 2023 year, the taxable wage base is $160,200.

For purposes of determining covered compensation for the 2023 year, the taxable wage base

The IRS today released an advance version of Rev. Rul. 2022-24 providing tables of covered compensation under section 401(l)(5)(E) for the 2023 plan year.

Rev. Rul. 2022-24 [PDF 118 KB] provides that for purposes of determining covered compensation for the 2023 year, the taxable wage base is $160,200.

For the 2022 plan year, the taxable wage base was $147,000.

Today’s revenue ruling includes two tables to be used in determining benefits for retirement plans that use “permitted disparity” in employer-provided contributions or benefits (as allowed under section 401(l))—

  • An actual table
  • A rounded table that aggregates different years of birth

Background

“Permitted disparity” allows an employer to provide an additional benefit (either contribution or accrual) for employees whose compensation is above a certain limit, which is often the social security wage base. A qualified plan may be integrated with the social security limit to provide a more uniform benefit when taking into account that social security provides a benefit targeted at lower paid employees. “Permitted disparity” limits the differences that can be provided between lower and higher paid employees.

“Covered compensation” for an employee is defined by Reg. section 1.401(l)-1(c)(7) as the average of the taxable wage bases in effect for each calendar year during the 35-year period ending with the last day of the calendar year in which the employee attains social security retirement age. For purposes of determining the amount of an employee's covered compensation, a plan may use IRS-provided tables that are developed by rounding the actual amounts of covered compensation for different years of birth.

 

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.