457 Contribution Limits

The maximum amount a person can contribute to his or her section 457 deferred compensation plan is set each year by the Internal Revenue Service after taking inflation into account. For the year 2013, people can contribute up to $17,500 as an elective deferral to their employer's 457 deferred compensation plan. Additionally, participants age 50 or older can contribute an additional $5,500 as a catch-up contribution.

457 Contribution Limits by Year

• For 2013: $17,500 ($23,000 if age 50 or older)
• For 2012: $17,000 ($22,500 if age 50 or older)
• For 2011: $16,500 ($22,000 if age 50 or older)
• For 2010: $16,500 ($22,000 if age 50 or older)
• For 2009: $16,500 ($22,000 if age 50 or older)

The 457 plan contribution limit applies to all 457 plans you might have for the current year. If you work at two or more jobs or switch jobs in the middle of the year, then you may need to track your 457 plan contributions yourself to ensure that you don't contribute over the limit.

For people who plan to contribute the maximum allowed, it may be easiest to break the annual limit into equal dollar amounts per pay period. That way, you'll be saving the same amount each pay period and will be dollar-cost-averaging into your retirement investments.

457 Plans Can Now Permit Designated Roth Accounts

Since 2010, employers are permitted to offer designated Roth accounts inside their 457 deferred compensation plans. Previously, 457 plans held only tax-deferred accounts. The Small Business Jobs Act of 2010 enables employers to revise their 457 plan to allow employees to place their salary deferrals into a designated post-tax Roth account and to permit employees to convert their pre-tax savings into a post-tax Roth.

Contributing to 457 and 401(k) or 403(b) Plans

Some employers offer both a section 457 plan and either 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.