457 Contribution Limits

The maximum amount a person can contribute to his or her is set each year by the IRS after taking inflation into account. For the year 2011, people can contribute up to $16,500 as an elective deferral to their employer's 457 deferred compensation plan. Additionally, if you are age 50 or older, you can contribute an additional catch-up contribution of $5,500.

457 Contribution Limits by Year

• 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. The annual 457 plan maximum limit per pay period amounts to:

• 26 pay periods (paid every two weeks): $634.61 (or $846.15 with catch-up contributions)
• 24 pay periods (paid twice a month): $687.50 (or $916.66 with catch-up contributions)
• 12 pay periods (paid once a month): $1,375 (or $1,833.33 with catch-up contributions)

457 Plans Can Now Permit Designated Roth Accounts

Starting in 2010, employers can 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 permit 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 Both 457 and 401(k) Plans

Some employers offer both a section 457 plan in addition to a 401(k) plan for their employees. In this situation, employees can contribute up to the annual maximum for both plans. For 2011, employees could contribute up to $16,500 in a 457 deferred compensation plan and up to $16,500 in a 401(k) plan.