2024 Defined Benefit Plan Limit
For 2024, the Defined Benefit Plan Limit is $275,000 (Annual benefit under a defined benefit plan) and $69,000 (Defined contribution plan limit).
Effective 2024-01-01Source: Notice 2023-75 (IRS)Verified 2026-08-29
Compared with 2023
| Item | 2023 | 2024 | Change |
|---|---|---|---|
| Annual benefit under a defined benefit plan | $265,000 | $275,000 | +$10,000 (+3.8%) |
| Defined contribution plan limit | $66,000 | $69,000 | +$3,000 (+4.5%) |
Who it applies to
Sponsors and participants of qualified defined benefit and defined contribution retirement plans subject to IRC Section 415.
What changed this year, and why
Effective January 1, 2024, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) of the Internal Revenue Code increased to $275,000, up from $265,000 in 2023. The related defined contribution plan limit under Section 415(c)(1)(A) also rose, to $69,000 for 2024 from $66,000 in 2023. These cost-of-living adjustments were published in IRS Notice 2023-75.
Common questions
- What does the defined benefit plan limit mean?
- Section 415(b)(1)(A) of the Internal Revenue Code caps the annual benefit that can be paid from a qualified defined benefit pension plan. For 2024, that cap is $275,000.
- How does this differ from the defined contribution plan limit?
- The defined contribution plan limit under Section 415(c)(1)(A) is $69,000 for 2024, up from $66,000 in 2023.
Every amount on this page is a published figure rather than yours. The Plan limit headroom takes the number you enter and works it out against them, showing which published figure it used.
The benefit limit is the lesser of a dollar cap and your average pay
Under a defined benefit plan, the annual benefit payable to any participant cannot exceed the lesser of two amounts: either 100% of the participant's average compensation during their highest 3 consecutive calendar years, or a fixed dollar limit set at $275,000 for 2024. This means that even if your average pay over your best three-year period exceeds $275,000, your annual retirement benefit is capped at that dollar amount. Conversely, if your average compensation is less than $275,000, the 100% of pay limit becomes the binding constraint. The rule ensures that defined benefit plans do not provide disproportionately large benefits to highly compensated participants relative to their actual earnings history.
Defined benefit plan. For 2024, the annual benefit for a participant under a defined benefit plan can't exceed the lesser of the following amounts. 1. 100% of the participant's average compensation for their highest 3 consecutive calendar years. 2. $275,000 for 2024 ($280,000 for 2025).
Publication 560 (2024), Retirement Plans for Small Business (IRS)
What makes a plan a defined benefit plan
A defined benefit plan is essentially any retirement plan that is not a defined contribution plan. Instead of specifying how much goes into the account each year, the plan promises a specific benefit amount to participants when they retire. To fund these promised benefits, the employer must make contributions that are calculated using actuarial assumptions and computations. These calculations determine how much money needs to be set aside today to provide the promised future benefits. Because of this complexity, employers typically need ongoing professional assistance to maintain a defined benefit plan properly. The plan structure focuses on the end result - the benefit the participant will receive - rather than the contribution amounts made along the way.
A defined benefit plan is any plan that isn't a defined con- tribution plan. Contributions to a defined benefit plan are based on what is needed to provide definitely determina- ble benefits to plan participants. Actuarial assumptions and computations are required to figure these contribu- tions. Generally, you will need continuing professional help to have a defined benefit plan.
Publication 560 (2024), Retirement Plans for Small Business (IRS)
The compensation an employer may take into account
When calculating contribution deductions for qualified retirement plans, employers cannot consider compensation above a certain threshold for each employee. For 2024, the maximum compensation that can be taken into account is $345,000 per employee. This means that even if an employee earns more than $345,000 in a year, the employer's deductible contributions are calculated as if the employee's compensation were exactly $345,000. The rule prevents excessive tax-advantaged contributions for highly paid employees and applies regardless of actual earnings. This compensation cap is separate from and in addition to the limits on contribution amounts themselves.
The maximum compensation that can be taken into account for each employee in 2024 is $345,000 ($350,000 in 2025).
Publication 560 (2024), Retirement Plans for Small Business (IRS)
The separate limit on a defined contribution plan
Defined contribution plans have a separate annual limit on how much can be added to each participant's account. For 2024, the total annual contributions and other additions (excluding investment earnings) cannot exceed the lesser of either 100% of the participant's compensation or $69,000. This limit applies to all sources of additions to the account, including employer contributions, employee contributions if permitted, and forfeitures allocated from other participants' accounts. However, catch-up contributions made by participants age 50 or older are not subject to this limit and can be made in addition to the regular contribution cap. The limit ensures that defined contribution plans maintain their tax-qualified status by preventing excessive accumulation in individual accounts.
Defined contribution plan. For 2024, a defined contri- bution plan's annual contributions and other additions (ex- cluding earnings) to the account of a participant can't ex- ceed the lesser of the following amounts. 1. 100% of the participant's compensation. 2. $69,000 for 2024 ($70,000 for 2025).
Publication 560 (2024), Retirement Plans for Small Business (IRS)
Why the deduction has to be figured by an actuary
The tax deduction for contributions to a defined benefit plan must be calculated by an actuary because the contribution amounts depend on complex actuarial assumptions and computations. Unlike defined contribution plans where the contribution amount is straightforward, defined benefit plans promise specific future benefits, requiring actuarial analysis to determine how much must be contributed today to fund those promised benefits. The actuary must consider factors such as participant demographics, expected salary growth, investment return assumptions, mortality tables, and the timing of benefit payments. This professional calculation ensures that employer deductions accurately reflect the cost of providing the promised retirement benefits while complying with IRS rules that limit deductions to amounts needed to fund benefits within the legal limits.
Defined benefit plans. The deduction for contributions to a defined benefit plan is based on actuarial assump- tions and computations. Consequently, an actuary must figure your deduction limit.
Publication 560 (2024), Retirement Plans for Small Business (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Notice 2023-75 (IRS)
- Annual benefit under a defined benefit plan
Effective January 1, 2024, the limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) of the Code is increased from $265,000 to $275,000.
- Defined contribution plan limit
The limitation for defined contribution plans under section 415(c)(1)(A) is increased in 2024 from $66,000 to $69,000.