2018 457(b) Contribution Limit
The 2018 457(b) Contribution Limit is $18,500.
Effective 2018-01-01Source: Notice 2017-64 (IRS)Verified 2026-08-29
Compared with 2017
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Deferral limit | $18,000 | $18,500 | +$500 (+2.8%) |
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)
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 ยง 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $18,000 to $18,500.