Are 401K And 457 Combined Contribution Limits? | Clear Retirement Facts

Understanding the Basics of 401(k) and 457 Plans

The 401(k) and 457 retirement plans are popular employer-sponsored savings options in the United States, designed to help employees build a nest egg for retirement. Both plans offer tax advantages, but they serve slightly different groups and have unique rules, especially regarding contributions.

A 401(k) plan is typically offered by private-sector employers, allowing employees to defer a portion of their salary into the plan on a pre-tax basis. The funds grow tax-deferred until withdrawal. On the other hand, the 457 plan is usually available to state and local government employees or certain non-profit organization workers. Like the 401(k), it offers tax-deferred growth but has some distinct features that appeal to its participants.

One question that often arises is about contribution limits: Can you combine your contributions to both plans? Are they counted together or separately for IRS limits? That’s where things get interesting.

Separate Contribution Limits: What the IRS Says

The IRS sets annual contribution limits for both 401(k) and 457 plans. For most employees under the age of 50, these limits are fixed amounts per year. Here’s how it breaks down:

• 401(k) limit: In 2024, employees can contribute up to $23,000.
• 457 plan limit: The same $23,000 limit applies separately for 457 plans.

Here’s the crucial part: the contribution limits for these two plans are independent of each other. That means if you participate in both a 401(k) and a 457 plan through different employers (or even the same employer if allowed), you can contribute up to the full limit in each plan.

This is unlike two traditional defined contribution plans under Section 402(g), such as multiple 401(k)s, where contributions count toward a single combined limit.

Example Scenario

Imagine Jane works full-time for a city government agency offering a 457 plan and also holds a part-time job at a private company with a 401(k) option. She can max out her $23,000 contribution in each plan, effectively saving $46,000 pre-tax in one year.

That’s an incredible opportunity for high savers aiming to boost their retirement funds quickly.

Catch-Up Contributions: Extra Savings Potential

Both plans allow additional “catch-up” contributions once you reach age 50 or older. This means you can contribute beyond the standard annual limit.

• 401(k) catch-up: An extra $7,500 in 2024.
• 457 catch-up: Also allows an additional $7,500.

However, there’s an important distinction with the 457 plan’s special catch-up provision known as the “three-year rule.” This rule lets participants who are within three years of normal retirement age contribute up to double the standard limit (up to $46,000 in total), assuming they didn’t max out contributions in prior years.

Because these catch-up options are separate for each plan type, you could potentially save tens of thousands more annually if eligible.

The Impact on Total Contributions

When combining regular and catch-up contributions across both plans after age 50, your total annual deferral could look like this:

Plan Type	Regular Limit (2024)	Catch-Up Limit (Age ≥50)
401(k)	$23,000	$7,500 additional
457 Plan	$23,000	$7,500 additional (or up to $46k with special catch-up)

This means individuals with access to both plans could theoretically defer over $60,000 annually once they hit catch-up eligibility—an exceptional advantage compared to only having one type of plan.

The Role of Employer Contributions in Combined Limits

While employee deferral limits remain separate between these two plans, employer matching or profit-sharing contributions add another layer of complexity.

Employer contributions do not count toward your individual deferral limit but do count toward overall annual additions limits set by IRS Section 415(c). For defined contribution plans like these:

• The total combined amount from employee plus employer contributions cannot exceed the lesser of:
• $66,000 (for 2024), or
• 100% of your compensation.

If you participate in both a 401(k) and a governmental or non-governmental 457(b) plan sponsored by your employer(s), employer contributions are tracked separately within each plan’s rules. However, since these are distinct types of retirement vehicles governed under different code sections (Section 401(a) vs. Section 457(b)), their employer contributions do not combine into one pot under Section 415(c).

This means you can receive matching funds from both employers without hitting an aggregate cap that lumps them together—an excellent benefit if you’re fortunate enough to access both programs through multiple jobs.

Navigating Employer Match Complexities

• For private-sector employers sponsoring a traditional or safe harbor 401(k), matching funds typically follow strict nondiscrimination testing.
• Governmental employers offering a deferred compensation (457(b)) plan may provide none or different types of matching incentives.
• If your employer offers both plans simultaneously (rare but possible), confirm how matches apply since some companies coordinate benefits across plans.

In any case, it pays off to carefully review your summary plan descriptions and consult HR or financial advisors familiar with multi-plan participation nuances.

Differences Between Governmental and Non-Governmental 457 Plans Affect Limits

Not all 457 plans are created equal. There are two main types:

• Governmental Section 457(b): Offered by state/local governments and certain tax-exempt organizations.
• Non-Governmental Section 457(b): Offered by private tax-exempt entities like hospitals or charities.

The good news is that governmental and non-governmental plans have different rules around combining limits:

• If you participate in multiple governmental Section 457(b) plans simultaneously at different jobs with separate employers, your total elective deferrals across all governmental plans must not exceed the single annual limit ($23k in 2024).
• If you have both governmental and non-governmental Section 457(b) plans concurrently (which is rare), their limits apply separately.

This nuance matters because it influences how much you can save if juggling multiple jobs with varying retirement benefits.

The Takeaway on Multiple Jobs and Plans

If you’re employed by several government agencies offering separate governmental Section 457(b)s or combined with private-sector jobs offering a traditional or Roth-style 401(k), here’s what applies:

• Your total elective deferrals across all governmental Section 457(b) accounts can’t exceed one overall limit.
• Your traditional/Roth 401(k) deferrals count against their own separate limit.
• You can max out both types independently up to those respective caps.

Knowing these distinctions helps avoid costly excess deferrals that trigger penalties when filing taxes later on.

The Impact of Roth Contributions on Combined Limits

Both types of retirement accounts may offer Roth options—where contributions are made post-tax but withdrawals come out tax-free after meeting certain conditions. Roth features exist within many modern employer-sponsored retirement programs:

• Roth 401(k): You contribute after-tax dollars within your overall regular contribution limit ($23k for example).
• Roth 457(b): This option is less common but available in some governmental deferred compensation programs.

Importantly:

• Your combined Roth plus traditional salary deferrals still must stay within each plan’s overall annual elective deferral limit.
• You cannot exceed $23k total contributed between Roth and pre-tax options inside either account individually.

Therefore:

• If contributing Roth inside your 401(k), it counts against that $23k maximum for that account alone.
• If contributing Roth inside your 457(b), it counts against its own separate $23k maximum.

Roth options give savers flexibility on tax planning without changing how combined contribution limits work between these distinct accounts.

The Importance of Monitoring Contributions Closely

Given all these moving parts—two different account types with separate limits; catch-up provisions; multiple employers; varied match rules—keeping track of your total saved dollars during any calendar year becomes essential.

Exceeding IRS contribution limits triggers penalties including excise taxes on excess amounts plus potential disqualification of favorable tax treatment until corrected. This can create headaches when filing taxes or withdrawing funds early.

Here’s what prudent savers should do:

• Create a personal tracking system: Maintain records showing how much you’ve contributed into each account throughout the year.
• Coordinate with HR/payroll: Ensure salary deferrals aren’t duplicated accidentally via automatic payroll deductions from multiple jobs/plans.
• Avoid last-minute rushes: Don’t wait until December to max out accounts blindly without confirming totals already contributed elsewhere.

Technology helps too—many financial institutions offer online dashboards letting participants monitor balances plus year-to-date deferrals easily.

A Quick Comparison Table Summarizing Key Points on Contribution Limits

Feature/Limit Type	401(k)	Section 457(b)
Total Employee Elective Deferral Limit (Under Age 50)	$23,000 (2024)	$23,000 (2024)
Catch-Up Contribution Limit (Age ≥50)	$7,500 additional standard catch-up	$7,500 standard + special three-year catch-up up to double regular limit ($46k)
Treatment of Employer Contributions	Adds up to overall annual addition limit ($66k); separate from employee deferrals but capped by IRS rules	Adds up similarly; tracked separately due to distinct code section rules; no combined cap with employee deferrals across both plans
Treatment When Participating In Both Plans Simultaneously	Separate elective deferral limits apply independently; can max out both accounts fully without combining caps
Mistakes To Avoid	Exceeding combined governmental Section 457(b) limits when holding multiple such accounts; ignoring coordination among multiple employers
Treatment Of Roth Contributions Within Each Plan	Capped within same overall elective deferral limit ($23k); no extra room beyond this amount	Capped similarly within own elective deferral limit ($23k); no cross-plan aggregation

Frequently Asked Questions

Are 401K and 457 combined contribution limits counted together?

No, 401(k) and 457 plans have separate contribution limits set by the IRS. You can contribute up to the maximum limit in each plan independently, allowing you to save more for retirement if you participate in both.

Can I contribute the maximum amount to both 401K and 457 plans simultaneously?

Yes, you can contribute up to the annual limit in both plans separately. For example, in 2024, you may contribute $23,000 to a 401(k) and another $23,000 to a 457 plan, effectively doubling your pre-tax savings potential.

How do catch-up contributions affect 401K and 457 combined contribution limits?

Catch-up contributions are additional amounts allowed once you turn 50 or older. Both plans permit catch-ups separately, so you can contribute extra funds to each plan beyond the standard limits.

Do employer contributions impact the combined limits of 401K and 457 plans?

Employer contributions do not count toward your individual contribution limits but do affect the overall total savings in each plan. The IRS has separate rules for employer contributions that vary between 401(k) and 457 plans.

Why are 401K and 457 contribution limits treated separately by the IRS?

The IRS treats them separately because they are distinct retirement plans serving different employee groups with unique rules. Unlike multiple 401(k) plans, combining these two allows participants to maximize their retirement savings.

The Bottom Line – Are 401K And 457 Combined Contribution Limits?

The straightforward answer is no—the IRS treats the elective salary deferral limits for traditional/private-sector 401(k) and governmental Section 457(b) deferred compensation plans as completely separate buckets. You’re allowed to contribute up to the maximum allowed in each account independently during any given year without those amounts combining against one another.

This separation creates an exceptional savings opportunity for workers who qualify for both types of accounts through different employers or roles. Add in generous catch-up provisions after age fifty along with employer matches handled distinctly per plan rules—and savvy savers can turbocharge their retirement funding beyond what many realize possible using just one type of account alone.

Still, this complexity demands careful monitoring so you don’t accidentally over-contribute across multiple jobs/plans sharing similar features—especially regarding multiple governmental Section 457 accounts held simultaneously where aggregate limits do apply differently than between 401(k) versus Section 457 combinations.

In essence: Yes! You can maximize your savings by leveraging both accounts fully—but keep tabs on details so those combined advantages translate into long-term financial security rather than costly tax headaches later on.