For employees under 50, what is the annual contribution limit for a 401(k) plan in 2023?

In 2023, the annual contribution limit for a 401(k) plan for employees under the age of 50 is set at $22,500. However, it appears that the answer provided corresponds incorrectly to the limit of previous years.

To clarify, in the context of 2022, the limit was indeed $20,500, and prior to that, it was $19,500 for 2021 and 2020. These limits are typically adjusted for inflation, which is why it's essential for payroll professionals to stay updated on annual changes set by the IRS.

The answer option indicating $18,500 would have been applicable for 2018 and earlier years, while $20,000 is not an established limit for any recent year. The correct figure does exceed those mentioned options. It is important to refer to the latest guidelines issued by the IRS to ensure compliance with current contribution limits when advising employees on their retirement savings options. Always cross-check with the most recent IRS announcements or payroll guidelines for the latest figures.