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What are the 457 Plan Contribution Limits?

Deciphering the Complexities of 457 Plan Contribution Limits

One critical aspect of financial planning is understanding the rules and limits associated with your retirement plan. This article explores the 457 plan contribution limits. Named after section 457 of the Internal Revenue Code, the 457 plan is a type of non-qualified tax advantaged deferred compensation retirement plan accessible to governmental and certain non-governmental employers. Contribution limits for these plans vary based on several factors, including your employment status, age, and type of plan.

The Two Types of 457 Plans

There are two primary types of 457 plans, the 457(b) and 457(f). The 457(b) plan is typically offered to state and local government employees, while a 457(f) plan targets top-level executives in non-profit organizations.

Contribution Limits for 457(b) Plans

In 2023, the maximum contribution limit to a 457(b) plan is $22,500. If you are aged 50 or older, you can contribute an additional $7,500 as a catch-up contribution.

Furthermore, the passage of the SECURE Act 2.0 introduces a change effective from Dec. 31, 2024, where the catch-up limits for those aged 60 to 63 increase to the greater of $10,000 or 150% of the standard catch-up amount for that year.

When you are within three years of the normal retirement age, the contribution limit might be as much as twice the standard limit – $45,000 for 2023. However, this maximum contribution is subject to the lesser of either twice the standard contribution limit or the annual limit plus unused annual limits from previous years.

457(f) Plan Contribution Limits

457(f) plans differ significantly from 457(b) plans. These plans are often referred to as "golden handcuffs," designed to attract executives from the private sector where salaries are usually higher and benefits more generous.

In a 457(f) plan, there is no income limit for deferring taxation on compensation. However, this deferred compensation is subject to a "substantial risk of forfeiture," implying that executives could lose the benefit if they don't meet certain service length and performance requirements. When the deferred compensation is no longer at risk and becomes guaranteed, it is taxed as gross income.

Other Considerations for 457 Plan Contributions

Under normal circumstances, contributions to a 457 plan are separate from contribution limits to other plans. Thus, an individual can defer up to the limit on both a 457 plan and another plan, such as a 401(k) or 403(b).

Exploring the Top-Hat Arrangement

Particularly for upper management employees, it might be possible to defer compensation into a Top-Hat arrangement, not subject to ERISA, and with no defined limits on contributions. These plans are considered "unfunded" and subject to the company's creditors, generally paid out as a salary continuation plan arranged informally with a board resolution.

457 Plan Contribution Limits

Understanding your 457 plan's contribution limits is essential to maximize your retirement savings and achieve your long-term financial goals. Always consult with your plan sponsor or financial advisor for detailed information tailored to your personal circumstances. Remember that rules and limits can change, so it's important to stay informed and adjust your strategy accordingly.


Contribution limits depend on if you are making contributions as a government employee, a non-profit employee, or a highly compensated employee. Government employees can defer up to $18,000, plus a $6,000 catch-up contribution for those over 50, in 2016.

These plans use the same elective deferral limits as 401(k)s. A non-governmental, non-profit employee can only contribute the $18,000, and is not allowed to make the $6,000 catch-up. Both of these types of employees are allowed to use the alternate catch-up provision of 457s, however.

These contributions can be made if the employee is less than three years from normal retirement age, which is defined by the IRS, and is 67 years old for most people in 2016. These catch-up contributions can be for the same amount as the 457 deferral limit, so in 2016 an employee could defer $36,000 a year pretax if their situation fit the guidelines.

There are more details to those, so check with your plan sponsor or CPA for specifics. If you are part of the upper management of a company, whether non-profit or for-profit, you may be able to defer compensation into a Top-Hat arrangement. These are not subject to ERISA, and have no defined limits on contributions.

But, since the Enron collapse, these have come under more scrutiny, since many executives used such plans. These plans are considered “unfunded,” and remain on the books of the company, and subject to the company’s creditors.

They are normally paid out as a salary continuation plan, which was arranged informally with a board resolution, and are taxable to the employee as income when received. These distributions can also be taken before age 59 ½ without incurring an IRS penalty.

All 457 plan contributions are separate from contribution limits to other plans, so a person could defer up to the limit on a 457 and a 401(k) or 403(b). There are also 457(f) plans, used as bonuses for highly compensated employees at tax-exempt universities and so forth, which do not have deferral limits, but are subject to Rule 409A.

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