2020 403(b) Contribution Limit
For 2020, the 403(b) Contribution Limit is $19,500 (Elective deferral limit) and +$6,500 (Catch-up limit, age 50 and over).
Effective 2020-01-01Source: Notice 2019-59 (IRS)Verified 2026-08-29
Compared with 2019
| Item | 2019 | 2020 | Change |
|---|---|---|---|
| Elective deferral limit | $19,000 | $19,500 | +$500 (+2.6%) |
| Catch-up limit, age 50 and over | +$6,000 | +$6,500 | +$500 (+8.3%) |
Who it applies to
Employees participating in applicable employer plans subject to the elective deferral limits under Section 402(g)(1) and Section 414(v)(2)(B)(i), including those age 50 or older who are eligible for catch-up contributions.
What changed this year, and why
For 2020, the IRS increased the elective deferral limit and the catch-up contribution limit for participants age 50 and over, effective January 1, 2020, as announced in Notice 2019-59.
Common questions
- What is the elective deferral limit for 2020?
- The elective deferral limit for 2020 is $19,500, effective January 1, 2020, increased from the prior year.
- Is there a catch-up contribution limit for older participants?
- Yes. Participants age 50 or older may make additional catch-up contributions of up to $6,500 in 2020, on top of the base elective deferral limit of $19,500.
The other ceiling: total contributions of 100% of pay
The plan faces a second ceiling on top of the elective-deferral limit: the limit on annual additions. This ceiling caps the total of every contribution that reaches the account in a year -- elective deferrals, employer nonelective contributions, and after-tax employee contributions combined. For 2020 the cap is the lesser of $57,000 or 100% of the employee's includible compensation for the most recent year of service. Because the cap is expressed as a percentage of pay, a participant could hit the pay-based ceiling well before reaching the dollar ceiling. Employees who maintain more than one account with the same employer must add the contributions across all of those accounts when testing the limit. The rule is a key reason the MAC worksheet asks for includible compensation: even if the elective-deferral limit is not yet reached, total contributions cannot exceed the annual-additions ceiling.
The limit on an- nual additions is generally the lesser of: • $56,000 for 2019 and $57,000 for 2020, or • 100% of your includible compensation for your most recent year of service.
Publication 571 (2020), Tax-Sheltered Annuity Plans (403(b) Plans) (IRS)
Two limits, and your MAC is the lesser of them
Your MAC is the maximum amount that can be contributed to the account for any year. There are two separate ceilings that could apply: the limit on annual additions and the limit on elective deferrals. Your MAC is always the lesser of those two limits. If the only contributions made during the year were elective deferrals under a salary reduction agreement, you must figure both limits and your MAC is the lesser of the two. If the only contributions were nonelective employer contributions, you only need to figure the limit on annual additions, and that becomes your MAC. If contributions were a combination of both types, you figure both limits and your MAC is the limit on annual additions. Catch-up contributions for participants age 50 or older are not counted against your MAC, so the actual ceiling for those participants is the MAC plus the allowable catch-up amount.
Generally, contributions to your 403(b) account are limited to the lesser of: • The limit on annual additions, or • The limit on elective deferrals. Depending upon the type of contributions made to your 403(b) account, only one of the limits may apply to you.
Publication 571 (2020), Tax-Sheltered Annuity Plans (403(b) Plans) (IRS)
The 15 years of service catch-up almost nobody uses
The 15-year rule is a special catch-up provision that almost nobody uses because the eligibility requirements are narrow and the recordkeeping is complex. To qualify, you must have at least 15 years of service with a qualifying employer -- an educational organization like a public or private school, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches. The plan document must also allow the provision. If you qualify, your elective deferral limit can be increased by the least of three amounts: $3,000; $15,000 reduced by certain prior elective deferrals; or a formula based on years of service and average compensation. The catch-up is allocated before the age 50 catch-up if you are eligible for both. Because the calculation requires tracking every dollar of elective deferrals made in all prior years and averaging compensation over your career, most participants and plan administrators find the administrative burden outweighs the benefit, which is why this provision sees little use in practice.
15-Year Rule 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; 2. $15,000, reduced by the sum of:
Publication 571 (2020), 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 on top of the regular elective-deferral limit, provided the employer's plan document allows it. For 2020, the maximum catch-up amount is $6,500. You are eligible only if you will reach age 50 by year-end, the plan permits catch-up contributions, and the maximum regular elective deferrals have already been made for the plan year. The catch-up amount cannot exceed the lesser of $6,500 or the excess of your compensation for the year over the elective deferrals that are not catch-up contributions. Importantly, catch-up contributions are not counted against your MAC. The maximum amount you are allowed to have contributed to the account is your MAC plus your allowable catch-up contributions. The total catch-up contributions across all plans maintained by your employer cannot exceed the annual limit of $6,500 for 2020.
If you will be age 50 or older by the end of the year, you may also be able to make additional catch-up contributions. These additional contri- butions can’t be made with after-tax employee contributions.
Publication 571 (2020), Tax-Sheltered Annuity Plans (403(b) Plans) (IRS)
What to do when too much went in
If actual contributions to the account (not including catch-up contributions) are greater than the MAC, the excess must be corrected. Excess contributions can result in income tax, additional taxes, and penalties, and the effect depends on the type of excess. There are two types: an excess annual addition, which is a contribution that exceeds the limit on annual additions, and an excess elective deferral, which is an amount that exceeds the limit on elective deferrals. In the year contributions exceed the limit on annual additions, the excess amount is included in income. If the account invests in mutual funds and the annual-additions limit is exceeded, a 6% excise tax may apply to the excess contribution each year it remains in the account; this excise tax does not apply to funds in an annuity account or to excess deferrals. The excise tax is not deductible. Excess contributions can be corrected by contributing less than the applicable limit in later years or by making permissible distributions. Participants should refigure their MAC at the end of the year or the beginning of the next year based on actual compensation and actual contributions to identify any excess before penalties accrue.
If your 403(b) account invests in mutual funds, and you exceed your limit on annual additions, you may be subject to a 6% excise tax on the excess contribution. The excise tax doesn’t ap- ply to funds in an annuity account or to excess deferrals.
Publication 571 (2020), 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 2019-59 (IRS)
- Elective deferral limit
The limitation under § 402(g)(1) on the exclusion for elective deferrals described in § 402(g)(3) is increased from $19,000 to $19,500.
- 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 is increased from $6,000 to $6,500.