Section 457 Retirement Plan Contribution Limits

Find out how much individuals can save in a 457 plan

Updated on January 16, 2022

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The maximum amount a person can contribute to a Section 457 deferred compensation plan is set each year by the IRS after taking inflation into account. You can contribute up to $19,500 as an elective deferral to your employer's 457(b) plan in 2021. This increases to a limit of $20,500 in 2022. Participants who are age 50 or older can contribute an extra $6,500 as a catch-up contribution in both years.

However, total contributions to a 457(b) plan can't exceed the lesser of 100% of your includible compensation for the year or the deferral limits. Your employer can match your contribution, but that would count toward your annual limit.

Some employers offer both a 457 plan and a 401(k) plan or a 403(b) plan for their employees. In this situation, employees can contribute up to the annual maximum for both plans.

Basics of Section 457 Plans

These plans are non-qualified, tax-advantaged retirement plans, and many taxpayers invest in them to supplement their Social Security and pension income in retirement. There are two types of 457 plans: 457(b) and 457(f). A 457(b) plan is usually available to local and state government workers and those employed by tax-exempt organizations. Less common are 457(f) plans, which are offered to top-level employees and some non-government employees. Federal government employees have Thrift Savings Plans instead.

You can make contributions to your plan with pre-tax dollars, which reduces your taxable income and can result in a decreased tax bill, particularly when you make annual contributions up to the limit. The money and its earnings are taxable, however, when you make withdrawals in retirement.

You may also have the option to invest after-tax dollars. These are considered Roth contributions, and you can withdraw them tax-free in retirement, but not all employers offer this option. Employers that offer it will provide you with various investment options for the money in your plan, and you can choose from among them.

Note

There's no 10% penalty for early withdrawals before age 59 1/2 with a 457 plan, unlike with many other retirement vehicles.

You can take withdrawals when you stop working, and you can usually roll your account into another retirement account, such as an IRA, if you change jobs. You'll also have the option to leave your money where it is or cash out the plan. Additionally, you can name a beneficiary or beneficiaries to receive the account assets upon your death.

Section 457 Plan Contribution Limits by Year

Year	Elective Salary Deferral Limit	Catch-up Contributions if Age 50 or Older	Total Possible Employee Contribution Limit
2022	$20,500	$6,500	$27,000
2021	$19,500	$6,500	$26,000
2020	$19,500	$6,500	$26,000
2019	$19,000	$6,000	$25,000
2018	$18,500	$6,000	$24,500
2017	$18,000	$6,000	$24,000
2016	$18,000	$6,000	$24,000
2015	$18,000	$6,000	$24,000
2014	$17,500	$5,500	$23,000
2013	$17,500	$5,500	$23,000
2012	$17,000	$5,500	$22,500
2011	$16,500	$5,500	$22,000
2010	$16,500	$5,500	$22,000

The 457 plan contribution limit applies to all 457 plans you might have for the current year. For example, if you have two plans, you can contribute $9,750 to each. You might want to track your 457 plan contributions to ensure that you don't contribute more than the limit if you work at two or more jobs or switch jobs in the middle of the year.

Note

It can be easiest to break the annual limit into equal dollar amounts per pay period if you plan to contribute the maximum allowed. This will allow you to save the same amount each pay period, and it will be dollar-cost averaging into your retirement investments.

Section 457 Plan Catch-Up Contributions

One unique feature of some 457 plans is what is called the "three-year rule." Normally, you would only be able to make catch-up contributions after reaching age 50, but 457 plans allow you to start three years before reaching the retirement age set by your plan. If your plan sets the retirement age at 51, for instance, the three-year rule allows you to make catch-up contributions at age 48. However, you can't make special catch-up contributions and the over-50 catch-up contributions at the same time.

Note

You may contribute twice the annual contribution limit—$39,000 in 2021 or $41,000 in 2022—or the annual limit plus the amount of the basic limit not used in prior years, whichever is less, for these special catch-up contributions.

Designated Roth Accounts in 457 Plans

Employers have been permitted to offer designated Roth accounts inside their 457 deferred compensation plans since 2010. The Small Business Jobs Act of 2010 enabled employers to revise their plans to allow employees to place salary deferrals into a designated post-tax Roth account and to permit employees to convert their pre-tax savings into a post-tax Roth. Before this, 457 plans held only tax-deferred accounts. The combined contributions to both Roth accounts and pre-tax accounts must not exceed the yearly limit.

Frequently Asked Questions (FAQs)

What's the biggest benefit of a 457 plan?

You can withdraw money from your 457 plan at any age without paying a 10% early-withdrawal penalty.

Can I roll my 457 plan into an IRA if I leave employment?

You can transfer the money from your 457 plan into another tax-advantaged account. However, you will lose any early withdrawal benefits if you need to use it before age 59 1/2.

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