In 2025, the wage base for the Social Security tax will increase by more than 4 percent, and Social Security benefits will increase 2.5 percent.

The per-participant PBGC premium rates for DB plans subject to ERISA will be higher in 2025. Although the PBGC’s variable-rate premium for single-employer plans will not change, the per-participant cap on that premium will increase. The PBGC guarantee will also increase.

2025 IRS retirement plan limits

On November 1, 2024, in Notice 2024-80, the IRS announced the 2025 dollar limits for qualified plans and other tax-favored retirement plans. The table below compares some of the 2025 limits to those limits for 2024.

IRS Retirement Plan Limits

¹ There are late-retirement adjustments for benefits starting after age 65.
² Under SECURE 2.0, plan sponsors may increase the catch-up limit for participants 60 to age 63 to $11,250.
³ When the Omnibus Budget Reconciliation Act of 1993 reduced the annual compensation limit from $200,000 to $150,000, it allowed public sector plans to avoid applying the reduced compensation limit for grandfathered participants (generally, those who became participants in the plan before January 1, 1996). The grandfathered amount for 2025, as shown in the table above, is the 2024 amount as indexed under 401(a)(17).

The IRS dollar limits for qualified plans and other tax-favored retirement plans are determined using Consumer Price Index (CPI) data. On October 10, 2024, the Bureau of Labor Statistics reported the CPI for All Urban Consumers increased 2.4 percent over the 12 months that ended September 30, 2024.

Social Security benefits

When designing retirement plan benefits, plan sponsors in the private sector generally consider Social Security benefits as a key part of their financial wellness programs because all private sector workers who are U.S. citizens or green card holders are covered by Social Security. In the public sector, some state and local government employees also participate in Social Security.

The Social Security cost-of-living adjustment (COLA) for 2025 will be 2.5 percent, nearly 1 percentage point lower than the 2024 COLA.

The Social Security wage base and earnings test will also increase for 2025.

Here’s how the 2025 figures compare to the 2024 figures:

Social Security Benefit Tests and Limits

¹ All earnings are subject to the Medicare tax.
² This amount is not tied to the CPI-W, but rather to earnings as reported to the Social Security Administration (SSA). The 2023 average (which is relevant for 2025) and background is on the SSA website.
³ PIA formula “bend points” are updated each year to reflect changes in the National Average Wage Index. The 2025 bend points are on the SSA website.
⁴ The maximum Social Security benefit at SSNRA is not tied to the CPI. It is based on the PIA formula (reflecting updated bend points) where a worker’s earnings are at the maximum taxable amount for his or her career. For workers born in 1943–1954, the SSNRA is age 66. Information on how SSNRA varies by birth year is on the SSA website.
⁵ In the year of attaining SSNRA, the early retirement earnings test is higher. For those attaining SSNRA in 2025, the maximum amount that can be earned before benefits are cut will be $62,160 until the month of attaining SSNRA, up from $59,520 in 2024. This higher earnings test applies only to earnings in months prior to the month of SSNRA attainment. After attaining SSNRA, individuals can receive their full benefits regardless of how much they earn.

A press release on this news, a fact sheet on 2025 Social Security figures and information about how the COLA is calculated are on the Social Security Administration’s website. Additionally, the COLA and other determinations for 2025 were published in the October 25, 2024 Federal Register.

PBGC premiums (for plans covered by ERISA)

On October 11, 2024, the PBGC published premium rates for 2025.

Based on indexing, the flat-rate premium for single employer plans will increase by $5. The variable-rate premium (VRP) per $1,000 of unfunded vested benefits for 2024 will be the same as for 2024 and the per-participant cap on the VRP will increase by more than 4 percent.

Premiums for Single-Employer Plans

See the PBGC’s premium rates webpage for current and historical information.

The flat-rate, per-participant premium for multiemployer plans will increase by $2.

Premium for Multiemployer Plans

The PBGC’s premium rates webpage also includes information about how the premium for multiemployer plans has changed over time.

Multiemployer plans do not pay a variable-rate premium.

PBGC guarantee limits for single-employer plans

The PBGC single-life annuity maximum guarantee for participants in single-employer pension plans that terminate during 2025 will increase by nearly 4.6 percent.

Guarantee Limit at Age 65 for Single-Employer Plans

The PBGC’s monthly maximum guarantee webpage lists the monthly maximum at every age from 45 to 75.

Action items

Before the end of this year, plan sponsors should:

• Incorporate the new maximums, limits and thresholds into their software programs or spreadsheets as needed (i.e., for nondiscrimination testing and benefit calculations).
• Make sure that third-party service providers are aware of changes applicable to the sponsor’s plan and are on track to implement them in time.

Sponsors of 401(k), 403(b) and governmental 457(b) plans might wish to remind participants to increase their salary reduction amounts before the first paycheck of the new year to take advantage of any increase in the deferral and/or age 50+ catch-up deferral limits for the 2025 year.