Are 401K And 403B Limits Combined? | Clear Retirement Facts

Understanding Contribution Limits for 401(k) and 403(b) Plans

Both 401(k) and 403(b) plans serve as powerful retirement savings vehicles offered by employers to their employees. While they share many similarities, the question “Are 401K And 403B Limits Combined?” often arises because of the overlapping nature of these plans for some workers. To grasp this fully, it’s essential to understand how contribution limits are set and applied.

The IRS sets annual contribution limits that cap how much an individual can defer into these plans each year. For 2024, the basic employee elective deferral limit is $23,000, with an additional catch-up contribution of $7,500 allowed for those aged 50 or older. This limit applies separately to each type of plan under most circumstances but can converge under specific employment situations.

Key Differences Between 401(k) and 403(b)

While both plans allow pre-tax contributions that grow tax-deferred until withdrawal, their eligibility criteria differ:

• 401(k): Primarily offered by private-sector employers.
• 403(b): Available to employees of public schools, certain non-profits, and tax-exempt organizations.

Despite this distinction in who offers these plans, the IRS treats their contribution limits similarly but not always independently.

When Are 401(k) And 403(b) Contribution Limits Separate?

For most employees who participate in either a 401(k) or a 403(b), the contribution limits apply individually. This means you can contribute up to $23,000 (2024 limit) to your 401(k) plan and separately up to $23,000 to your 403(b), effectively doubling your potential retirement savings.

This scenario is common among individuals who work multiple jobs or have access to multiple employer-sponsored plans that fall under different categories. For example:

• A teacher working part-time for a public school (eligible for a 403(b)) and also working part-time at a private company offering a 401(k).
• An employee who switches jobs mid-year from a private company with a 401(k) plan to a non-profit organization with a 403(b).

In these cases, the IRS views each plan as distinct because they fall under different sections of the tax code (Section 401 vs. Section 403), allowing separate contributions up to the limit.

Example Scenario: Separate Limits

Imagine Jane contributes $15,000 to her employer’s 401(k). Later in the year, she takes a part-time job at a university where she participates in their 403(b). She could contribute an additional $8,000 (up to the total $23,000 limit per plan), maximizing her savings without breaching IRS rules.

When Are Contribution Limits Combined?

The confusion arises when an individual participates in multiple plans from the same employer or related employers that fall under similar tax classifications. Specifically:

• If you participate in both a traditional 401(k) and a SIMPLE IRA with the same employer.
• If you have two or more plans categorized as either all Section 401(k)s or all Section 403(b)s from related employers.

In such cases, the IRS requires that your total elective deferrals do not exceed the annual limit across all those plans combined.

For example, if you work for an organization that offers both a traditional defined contribution plan (like a regular 401(k)) and a supplemental plan classified as another type of Section 401 plan, your total contributions across these must stay within one combined limit.

The Role of Aggregation Rules

Aggregation rules come into play when multiple retirement accounts are linked by ownership or control relationships between employers. The IRS treats these accounts as one for contribution limit purposes. This means if you participate in two related employers’ plans—both offering either only Section 401(k)s or only Section 403(b)s—the limits apply collectively rather than separately.

However, since Section 401(k) and Section 403(b) belong to different sections of the tax code, they typically do not aggregate unless there is some unusual arrangement or overlapping employment status that triggers special rules.

Catch-Up Contributions: Are They Combined?

Catch-up contributions allow individuals aged 50+ to save more annually beyond standard limits. The catch-up amount is currently $7,500 (as of 2024). The question arises whether catch-up contributions count separately for each plan type or if they combine across both.

The IRS treats catch-up contributions similarly to standard contributions regarding aggregation:

• If you contribute catch-up amounts to both a separate employer’s 401(k) and another employer’s unrelated plan such as a distinct employer’s separate Section 403(b), you can make catch-up contributions up to the maximum allowed on each.
• However, if you participate in multiple plans under related employers within one section (all Section 401(k)s or all Section 403(b)s), catch-up contributions also aggregate across those plans.

This means it’s possible to maximize catch-up contributions across both types of plans if they are unrelated but more restrictive if they fall under aggregation rules within similar plan types.

Employer Contributions: Separate from Employee Limits

It’s important to highlight that employer matching or profit-sharing contributions do not count toward your personal elective deferral limits. These are subject instead to overall defined contribution plan limits.

For example:

Contribution Type	Limit Applies To	Notes
Employee Deferrals	$23,000 (2024 standard limit)	Applies per individual per plan section
Catch-Up Contributions	Additional $7,500	For participants aged ≥50
Employer Contributions	Up to total defined contribution limit ($66,000 in 2024)*	Not counted towards employee deferral cap

*The total combined amount of employee + employer contributions cannot exceed this overall defined contribution limit set by the IRS annually.

This distinction ensures employees can maximize their personal deferrals while still benefiting from any matching funds offered by their employers without violating IRS rules.

Special Considerations for Dual Participation

Some workers find themselves contributing simultaneously to both types of plans due to unique employment circumstances—such as working full-time at one institution offering a traditional corporate-style retirement plan (a typical private-sector employer with a Section 401(k)) while also holding part-time employment at an educational institution offering a Section 403(b).

In these situations:

• The elective deferral limits apply separately since each plan falls under different sections.
• You should track contributions carefully because mistakes could lead to excess deferrals.
• Excess deferrals must be withdrawn promptly; otherwise, they face double taxation penalties.

Employers typically provide statements showing your year-to-date elective deferrals per plan. It’s wise for employees managing multiple accounts across different employers or sectors to maintain detailed records themselves too.

Tracking Contributions Across Plans

Since it’s rare for payroll systems from unrelated employers sharing different retirement codes (Section 401 vs. Section 403) to communicate directly about your total deferrals across all jobs during one calendar year:

• You must proactively monitor your total contributions.
• Use pay stubs and quarterly statements.
• Consult with HR or benefits coordinators if unsure about cumulative totals.

Failing this could lead inadvertently exceeding limits resulting in tax complications during filing season.

The Impact on Retirement Planning Strategies

Knowing whether “Are 401K And 403B Limits Combined?” affects how much money you can stash away influences retirement planning significantly. Here’s why:

1. Maximizing Savings Potential:
If allowed separate limits between these two types of accounts due to different job sectors/employers — it means potentially doubling your tax-deferred savings capacity annually compared with participating in just one type alone.

2. Tax Efficiency:
Both accounts provide similar tax advantages—pre-tax deferral reduces taxable income today while investments grow tax-deferred until withdrawal—but having access to two distinct accounts can diversify investment options offered by each provider tailored toward different risk appetites or goals.

3. Flexibility at Withdrawal:
Although withdrawals from both are taxed as ordinary income upon distribution unless Roth versions exist—having multiple accounts allows flexibility when rolling over funds into IRAs later on or managing Required Minimum Distributions (RMDs).

4. Employer Match Optimization:
Some employers match only on certain types of contributions; understanding how limits interact helps optimize match benefits without over-contributing unnecessarily elsewhere.

Summary Table: Comparison of Contribution Rules

Plan Type	Elective Deferral Limit (2024)	Limit Aggregation Rule
401(k)	$23,000 + $7,500 Catch-Up*	Aggregated with other Section 401(k)-type plans from related employers; separate from Section 403(b)
403(b)	$23,000 + $7,500 Catch-Up*	Aggregated with other Section 403(b)-type plans from related employers; separate from Section 401(k)
SIMPLE IRA / SIMPLE Plan	$16,000 + $3,500 Catch-Up*	SIMPLE IRA has its own lower limit; aggregated separately from traditional plans.

*Catch-up applies only if age ≥50

Frequently Asked Questions

Are 401K and 403B limits combined for contribution purposes?

Generally, 401(k) and 403(b) contribution limits are treated separately by the IRS. This means you can contribute up to the annual limit in each plan independently, effectively doubling your potential retirement savings if you have access to both.

When are 401K and 403B limits combined under IRS rules?

Limits may combine if you participate in multiple plans under the same employer or if the plans fall under similar tax code sections. However, for most employees with separate employers, the limits remain distinct and separate.

Can I contribute the maximum to both 401K and 403B plans in the same year?

Yes, if you qualify for both plans through different employers, you can contribute up to the maximum limit in each plan separately. This allows you to maximize your retirement contributions across both accounts.

How does age affect combined contribution limits for 401K and 403B?

If you are age 50 or older, you can make catch-up contributions to each plan separately. The additional catch-up amount applies individually to both 401(k) and 403(b), increasing your total allowable contributions.

What happens if I switch jobs between a 401K and a 403B plan in one year?

If you switch jobs from an employer offering a 401(k) to one offering a 403(b), your contribution limits generally remain separate. You can contribute up to the limit in each plan during that calendar year without combining the limits.

Conclusion – Are 401K And 403B Limits Combined?

To wrap it up clearly: generally speaking,the contribution limits for your elective deferrals between a traditional private-sector employer’s 401(k) and an educational/non-profit employer’s 403(b) are not combined.You may contribute up to the maximum allowed in each account independently—potentially doubling your annual pre-tax retirement savings opportunity compared with having access only to one type of plan.

However,aggregation rules apply when multiple plans belong within the same section category (multiple Section 401(k)s or multiple Section 403(b)s), especially when linked by related employers.This means total elective deferrals count toward one combined limit rather than separate ones in those cases.

Knowing exactly how these rules affect your personal situation empowers smarter saving decisions while avoiding costly excesses and penalties down the line. Keep close tabs on your yearly contributions across all jobs offering retirement benefits—and leverage this knowledge fully so you can build robust financial security for retirement years ahead!