2016 457(b) Contribution Limit
The 2016 457(b) Contribution Limit is $18,000.
Effective 2016-01-01Source: Notice 2015-75 (IRS)Verified 2026-08-29
Who it applies to
Participants in deferred compensation plans under § 457(b) sponsored by state and local governments or tax-exempt organizations
What changed this year, and why
The elective deferral limit for deferred compensation plans of state and local governments and tax-exempt organizations under § 457 remained at $18,000 for 2016.
Common questions
- What is the § 457(b) contribution limit for 2016?
- The limit on elective deferrals under § 457(b) is $18,000 for 2016.
- Did the limit change from the prior year?
- No. The IRS kept the deferral limit under § 457 unchanged at $18,000 for 2016.
Your limit is the lesser of the dollar cap and your includible compensation
Section 457 plans cover employees of state or local governments and certain tax-exempt organizations. For 2016, the maximum elective deferral is the lesser of $18,000 or your includible compensation. Includible compensation is generally the pay you received from the employer maintaining the plan, including wages, salaries, fees for professional services, commissions, tips, bonuses, fringe benefits, and employer contributions to the 457 plan and certain other qualified plans. If your includible compensation for the year is below the dollar cap, your deferral limit is that lower amount rather than the full $18,000. This prevents participants from deferring more than they earned from the plan sponsor during the year. Special catch-up provisions may raise the limit for participants nearing normal retirement age or those who have reached age 50, which are discussed in separate rules.
Limit for deferrals under section 457 plans. If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or taxexempt or ganizations), you should have deferred no more than the lesser of your includible compensation or $18,000 in 2016.
Publication 525 (2016), Taxable and Nontaxable Income (IRS)
The special catch-up in the last 3 years before normal retirement age
Under a section 457 plan, if you are within the final 3 years before reaching normal retirement age as defined by the plan, the plan may permit you to defer more than the standard annual limit. For 2016, this increased limit is the lesser of $36,000 or the basic annual limit plus any unused basic limit from prior years. The second option - adding unused prior-year capacity - is only available if you are not also using age-50 catch-up contributions. This special catch-up provision lets participants approaching retirement make up for years when they were unable to defer the full basic amount, but the plan must explicitly allow it. If the plan does not provide for this increased limit, or if you are not yet within the 3-year window, the regular deferral limit applies instead.
Increased limit. During any, or all, of the last 3 years ending before you reach normal re tirement age under the plan, your plan may pro vide that your limit is the lesser of: 1. Twice the annual limit ($36,000 for 2016), or 2. The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catchup contributions).
Publication 525 (2016), Taxable and Nontaxable Income (IRS)
The age 50 catch-up, and who can use it
A governmental section 457 plan may allow age-50 catch-up contributions if you meet two conditions. First, you must have reached age 50 by the end of the calendar year. Second, no other elective deferrals can be made for you to the plan for that year because of other plan limits or restrictions, such as reaching the basic annual deferral cap. If both conditions are met, your deferral limit for the year can be the lesser of your includible compensation or $18,000 plus an additional $6,000 catch-up amount. Note that this age-50 catch-up is available only under governmental section 457 plans; the same catch-up is not available under tax-exempt (non-governmental) 457(b) arrangements. If you are also within three years of normal retirement age and the plan offers the separate three-year pre-retirement increased limit, that alternative limit may be higher than the age-50 catch-up amount.
Catch-up contributions. You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. If you qualify, your limit can be the lesser of your includible compensation or $18,000, plus $6,000.
Publication 525 (2016), Taxable and Nontaxable Income (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)
- Deferral limit
The limitation on deferrals under § 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $18,000.