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Compliance January 2, 2025
IRS Covered Compensation Tables Available for 2025
The two tables allow plan sponsors to determine additional benefits for employees whose compensation exceeds certain levels.
Reported by PLANSPONSOR Staff
The Internal Revenue Service released in late December 2024 the covered compensation tables for plan sponsors to determine 2025 benefits for qualified plans that offer additional contributions or accruals to employees whose compensation exceeds certain levels.
The tables, listed in Revenue Ruling 2025-2, show the covered compensation amounts for “permitted disparity” benefits, which allow for larger contributions or accruals in excess of the Social Security wage base, without violating applicable nondiscrimination requirements.
To determine 2025 plan year covered compensation, the taxable wage base is $176,100 as of January 1. For 2024, the taxable wage base was $168,600.
The IRS tables include an unrounded version and a rounded version that aggregates different years of birth.
Covered compensation is defined by Section 1.401(I)-(c)(7) of the Internal Revenue Code, according to a post by tax consultancy KPMG. The covered compensation for an employee takes the average of the taxable wage base 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, the consultancy explained.