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IRS Announces Cost-of-Living Increases to ESOP Thresholds and Other Employer-Sponsored Retirement Plans


November 2, 2022

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1 minute


On October 21, 2022, the Internal Revenue Service announced the cost-of-living adjustments (COLA) to the limits on various employer-sponsored retirement and welfare plans, including employee stock option plans (ESOPs). Effective January 1, 2023, the ESOP limit for determining the maximum account balance subject to the general five-year distribution will increase from $1.23 million to $1.33 million, and the ESOP additional year threshold will increase from $245,000 to $265,000. In addition, the Social Security Administration has announced that the social security COLA would increase by 8.7% in 2023.

Many other contribution and benefit thresholds will also increase significantly from their 2022 limits, including the elective contribution limit for 401(k), 403(b) and 457(b) plans and catch-up contribution limits available to participants age 50 and over.

LP’s ESOP Services Practice is available to answer any questions you might have. For more information, see our additional resources on ESOPs:

Why Now Is the Right Time to Consider an ESOP

Becoming the Client: Why an ESOP Attorney Chose to Sell His Company to an ESOP

Navigating Financing Issues Involved in ESOP Transactions: A Q&A with ESOP Experts

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