2018 457(b) Contribution Limit
For 2018, the 457(b) Contribution Limit figures are $18,500 (Deferral limit) and +$6,000 (Catch-up limit, age 50 and over).
Effective 2018-01-01Source: Notice 2017-64 (IRS)Verified 2026-09-04
Compared with 2017
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Deferral limit | $18,000 | $18,500 | +$500 (+2.8%) |
| Catch-up limit, age 50 and over | +$6,000 | +$6,000 | +$0 (+0.0%) |
Who it applies to
Participants in Section 457(b) deferred compensation plans sponsored by state and local governments or tax-exempt organizations
What changed this year, and why
The elective deferral limit for deferred compensation plans described in Section 457(b), maintained by state and local governments and tax-exempt organizations, increased to $18,500 for 2018.
Common questions
- What is the deferral limit under Section 457(b) for 2018?
- Effective January 1, 2018, the limit on elective deferrals under Section 457(b) is $18,500.
- Did the limit change from the prior year?
- Yes. The deferral limit increased from the prior year.
Your limit is the lesser of the dollar cap and your includible compensation
For 2018, the basic deferral limit for participants in section 457 plans is $18,500, but this dollar cap is only one part of the calculation. Your actual limit is the lesser of the $18,500 cap or your includible compensation for the year. This means if your includible compensation is less than $18,500, you cannot defer the full $18,500 - you can only defer up to what you actually earned. The rule applies to deferred compensation plans maintained by state or local government employers or tax-exempt organizations. This limitation ensures that participants cannot defer more than they earn, even though the dollar limit appears to allow it.
If you're a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt or- ganizations), you should have deferred no more than the lesser of your includible compensation or $18,500 in 2018.
Publication 525 (2018), Taxable and Nontaxable Income (IRS)
The special catch-up in the last 3 years before normal retirement age
If you are within 3 years of normal retirement age under your section 457 plan, your plan may provide an increased deferral limit during those final 3 years before you reach normal retirement age. For 2018, this increased limit is the lesser of twice the annual limit ($37,000) or the basic annual limit plus the amount of the basic limit not used in prior years. The second option (using unused basic limit from prior years) is only allowed if you are not also using age 50-or-over catch-up contributions. This special catch-up provision allows participants nearing retirement to make up for deferrals they were unable to make in earlier years, subject to the plan's terms and the specified limits.
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 ($37,000 for 2018), 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 catch-up contributions).
Publication 525 (2018), Taxable and Nontaxable Income (IRS)
The age 50 catch-up, and who can use it
If you participate in a governmental section 457 plan, you may be eligible for an age 50 catch-up contribution. To qualify, you must have 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 meet both conditions, your deferral limit becomes the lesser of your includible compensation or $18,500, plus $6,000. This additional amount allows eligible participants age 50 or older to defer more than the basic limit, assuming their includible compensation is at least that combined amount. The age 50 catch-up and the three-year pre-retirement catch-up are separate provisions - if you qualify for both, the pre-retirement catch-up limit may be higher.
If you qualify, your limit can be the lesser of your includible compensation or $18,500, plus $6,000.
Publication 525 (2018), Taxable and Nontaxable Income (IRS)
The window to pull out an excess deferral closes April 15
If you defer more than the $18,500 limit into a governmental 457(b) plan in 2018, the excess is called an excess deferral. You must ask the plan to distribute the excess - and any income it earned - to you by April 15 of the year after the deferral was made. If you take part in more than one plan, you may have the excess paid out of any plan that allows these distributions, but you must tell each plan by its own deadline how much to pay from that particular plan. The plan is then required to pay you the excess plus any earnings on it by that April 15 date. You also must include the excess deferral in your income for the year it was deferred (unless it was a designated Roth contribution) by reporting it on Form 1040.
The plan then must pay you the amount of the ex- cess, along with any income earned on that amount, by April 15 of the following year.
Publication 525 (2018), Taxable and Nontaxable Income (IRS)
There is no form to file - your employer reports it on your W-2
When you make elective deferrals to a governmental section 457(b) plan, your employer handles the tax reporting on your behalf. Your employer generally should not include these elective deferrals in your wages in box 1 of Form W-2. Instead, your employer marks the "Retirement plan" checkbox in box 13 and shows the total amount deferred in box 12 using the appropriate code. This means there is no separate form for you to file to report your 457(b) contributions - the deferrals are reported directly on your W-2 by your employer. You simply need to verify that the amounts shown on your W-2 are correct when you file your tax return. The reporting is automatic and does not require any additional action from you beyond ensuring accuracy.
Your employer gen- erally shouldn't include elective deferrals in your wages in box 1 of Form W-2. Instead, your em- ployer should mark the Retirement plan check- box in box 13 and show the total amount defer- red in box 12.
Publication 525 (2018), Taxable and Nontaxable Income (IRS)
Leave the excess in the plan and it is taxed twice
If you defer more than the $18,500 limit for 2018 to your governmental section 457(b) plan and do not withdraw the excess amount by April 15 of the following year, you face a significant tax consequence. The excess deferral cannot be included in the cost of the contract even though you already included it in your income for the year of the deferral. As a result, you are taxed twice on the excess deferral left in the plan - once when you contribute it (because it was included in your income that year) and again when you eventually receive it as a distribution from the plan. This double taxation makes it essential to withdraw any excess deferrals within the required timeframe to avoid paying tax on the same money twice.
If you don't take out the excess amount, you can't include it in the cost of the contract even though you inclu- ded it in your income. Therefore, you're taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution.
Publication 525 (2018), Taxable and Nontaxable Income (IRS)
A 457(b) limit does not share room with a 401(k) or 403(b)
IRS Publication 525 groups elective deferral plans into two sets for the annual limit. The first three plan types on its list - a section 401(k) plan, the Thrift Savings Plan, and a salary reduction SEP - share one combined limit. A section 457 plan is the seventh type on that same list, grouped instead with a SIMPLE plan, a section 403(b) plan, and a section 501(c)(18)(D) plan, each of which the publication says has its own specific plan limit rather than a share of the first group's combined figure. Because the publication treats a section 457 plan's limit as one of these separate, specific plan limits rather than folding it into the combined figure for the first group, a worker who defers into both a section 401(k) plan and a governmental section 457 plan in the same year is measured against two separately stated limits rather than one shared figure split between the two accounts. The same separation holds between a section 457 plan and a section 403(b) plan, since a section 403(b) plan is also one of the specific-limit plan types rather than part of the combined group.
of contributions to the plans lis- ted in (1) through (3), earlier. The specific plan limits for the plans listed in (4) through (7), ear- lier, are discussed later.
Publication 525 (2018), 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 2017-64 (IRS)
- Deferral limit
The limitation on deferrals under § 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $18,000 to $18,500.
- 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 remains unchanged at $6,000.