The IRS has recently released the 2023 retirement plan contribution limits. For super-savers at BP, things are looking up. BP employees can now contribute $22,500 (or $30,000 for those over 50 years old) of pre-tax or Roth savings to the BP Employee Savings Plan (ESP) and can get $72,500 (or $81,000 for those over 50 years old) of retirement savings into tax-efficient vessels in 2023.
How BP Employees Can Maximize Their Retirement Plan Contributions
What is BP's 401(k) Match?
It’s important to ensure that you are contributing at least 7% of your pay every pay period to receive the full 7% company match. At BP, it is easy to miss the opportunity to receive company contributions, so make sure you do the math every year! The maximum amount BP will put in any employee's 401(k) in 2023 is $23,100.
How to Max Out Your 401(k) Contributions at BP
If you’re under age 50, the total IRS limit for 401(k) contributions in 2023 from employee or employer contributions is $66,000. If BP contributes the full $23,100, employees under 50 can contribute $42,900 across the Pre-Tax, Roth, or After-Tax sources.
If you’re over age 50, the total IRS limit for 401(k) contributions in 2023 from employee or employer contributions is $73,500. If BP contributes the full $23,100, employees over age 50 can contribute $50,400 across the Pre-Tax, Roth, or After-Tax sources.
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2023 401(K) Income Limits and Strategic Savings for BP Employees
The annual compensation limit for 2023 has increased from $305,000 to $330,000. If you make more than $330,000 in base and bonus compensation for 2023, remember to ensure you max out your BP ESP 401(k) contributions prior to earning $330,000 of income. After you earn $330,000 of income, you can no longer contribute to the 401(k), and contributions are deflected to another savings plan, the Excess Compensation Plan (ECP), with more stringent provisions.
BP Employees Can Save More With a Backdoor Roth Strategy for Tax-Optimized Savings
Many BP employees will be able to take advantage of the backdoor Roth savings strategy. With the IRA contribution limits increasing to $6,500 (and $7,500 if over age 50), it means super-savers at BP can put away up to $49,400 (or $57,900 if over age 50) between the BP 401(k) and backdoor Roths into tax-preferred retirement accounts. It’s important to keep in mind that these are the maximum numbers and are subject to the income limits outlined in the BP ESP 401(k) Plan.
The 2023 limit adjustments will be advantageous for super-savers at BP and it is important to be sure that you make the most of these changes. At Willis Johnson & Associates, we work with our clients to ensure they get the full 7% company match, take advantage of backdoor Roth IRAs to ensure they are on track for success, and facilitate after-tax roll-outs from the 401(k) to get the maximum amount of savings. If you have any questions about the 2023 contribution and compensation limits, please contact your advisor, or schedule a free consultation with one of our BP specialists.
