2016 403(b) Contribution Limit
For 2016, the 403(b) Contribution Limit is $18,000 (Elective deferral limit) and +$6,000 (Catch-up limit, age 50 and over).
Effective 2016-01-01Source: Notice 2015-75 (IRS)Verified 2026-09-01
Who it applies to
Employees participating in tax-sheltered annuity retirement plans
What changed this year, and why
For 2016, the elective deferral limit for tax-sheltered annuity plans is $18,000, effective January 1, 2016. Participants age 50 or over may make an additional catch-up contribution of $6,000.
Common questions
- How much can an employee defer into a tax-sheltered annuity plan in 2016?
- The basic elective deferral limit is $18,000. Participants who are age 50 or older by the end of the year may contribute an additional $6,000 as a catch-up contribution.
- When did these limits take effect?
- The limits took effect on January 1, 2016.
The other ceiling: total contributions of 100% of pay
A retirement account faces a second ceiling beyond the elective-deferral cap: the limit on annual additions. This limit covers every contribution that enters the account - salary-reduction deferrals, employer nonelective contributions, and aftertax employee contributions combined. For 2016, the total of all these additions cannot exceed the lesser of $53,000 or 100% of the participant's includible compensation for their most recent year of service. In practice this means that even if the $18,000 elective-deferral limit has not been reached, no one may receive more in total contributions than they earned in includible compensation. Participants who maintain more than one account with the same employer must combine the contributions when testing the limit, but those who participate in plans maintained by different employers do not aggregate for this test.
$53,000 for 2015 and 2016, or 100% of your includible compensation for your most recent year of service.
Publication 571 (2016), Tax-Sheltered Annuity Plans (403(b) Plans) (IRS)
Two limits, and your MAC is the lesser of them
A 403(b) account actually has two separate ceilings, and you must apply both of them whenever elective deferrals are involved. The first ceiling is the limit on annual additions, which caps all contributions to your account - elective deferrals plus employer contributions and forfeitures - at the lesser of your includible compensation or a flat dollar amount set each year. The second ceiling is the limit on elective deferrals, which caps only the salary-reduction portion at $18,000 for 2016. Your Maximum Amount Contributable (MAC) for the year is the lesser of those two limits. If only nonelective employer contributions are being made, only the annual additions limit applies. If only salary-reduction deferrals are being made, you still calculate both limits and take the smaller one. Certain catch-up contributions sit on top of the MAC and are not counted against it, so the most you can have contributed is your MAC plus your allowable catch-up amounts. You refigure your MAC at the beginning of the year and again at year end using actual compensation and actual contributions to make sure you have not gone over either ceiling.
Generally, contributions to your 403(b) account are limited to the lesser of: The limit on annual additions, or The limit on elective deferrals.
Publication 571 (2016), Tax-Sheltered Annuity Plans (403(b) Plans) (IRS)
The 15 years of service catch-up almost nobody uses
This is the catch-up almost nobody qualifies for, and it is worth checking because it stacks with the ordinary one. It needs three things at once: at least 15 years of service with a qualifying employer - a school, hospital, home health or welfare agency, church or association of churches, not any employer that happens to offer a 403(b) - and a plan document that allows it. Where all three hold, the $18,000 limit on elective deferrals is raised by the least of three amounts, the first of which is $3,000. The other two look back over your whole history with that employer, which is why the increase shrinks the more you have already used it. It is separate from the $6,000 catch-up for older participants, so someone eligible for both can use both, and the plan administrator applies this one first.
If you have at least 15 years of service with an educational organization (such as a public or private school), hospital, home health service agency, health and welfare service agency, church, or convention or association of churches (or associated organization) and it is allowed by the terms of the plan document, the limit on elective deferrals to your 403(b) ac count is increased by the least of: 1. $3,000;
Publication 571 (2016), Tax-Sheltered Annuity Plans (403(b) Plans) (IRS)
The age 50 catch-up sits on top of the limit
Participants who will be age 50 or older by the end of the year may make additional catch-up contributions, provided the plan document allows them and the maximum elective deferrals under the regular limit have already been made for the plan year. The catch-up limit is the lesser of $6,000 for 2016 or the excess of compensation over non-catch-up elective deferrals. These contributions cannot be made with aftertax employee contributions. They are not counted against the MAC, so the maximum amount allowed in the account for the year is the MAC plus the allowable catch-up contributions. When a participant is eligible for both the years-of-service catch-up and the age 50 catch-up, amounts must be allocated first under the years-of-service rule and then as an age 50 catch-up. The total catch-up contributions across all plans maintained by the same employer cannot exceed $6,000.
If you will be age 50 or older by the end of the year, you may also be able to make additional catchup contributions.
Publication 571 (2016), Tax-Sheltered Annuity Plans (403(b) Plans) (IRS)
What to do when too much went in
If actual contributions - excluding catch-up contributions - exceed the MAC at the end of the year, the participant has an excess contribution. Excess contributions can result in income tax, additional taxes, and penalties. The participant should refigure the MAC based on actual compensation and contributions at year-end or early the following year to identify any excess. There are two types: an excess annual addition and an excess elective deferral. Excess annual additions are included in income in the year contributed and may subject the account to an excise tax if it invests in mutual funds; the tax must be paid each year the excess remains. Excess contributions can be corrected by contributing less than the applicable limit in later years or by making permissible distributions. Excess elective deferrals may be distributed by the plan no later than April 15 of the following year, and if distributed by that date, the deferral is included in income in the year contributed while any earnings are taxed in the year distributed.
If your actual contributions (not including catchup contributions) are greater than your MAC, you have an excess contribution.
Publication 571 (2016), Tax-Sheltered Annuity Plans (403(b) Plans) (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Notice 2015-75 (IRS)
- Elective deferral limit
The limitation under § 402(g)(1) on the exclusion for elective deferrals described in § 402(g)(3) remains unchanged at $18,000.
- Catch-up limit, age 50 and over
The dollar limitation under § 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in § 401(k)(11) or § 408(p) for individuals aged 50 or over remains unchanged at $6,000.