2020 457(b) Contribution Limit
For 2020, the 457(b) Contribution Limit figures are $19,500 (Deferral limit) and +$6,500 (Catch-up limit, age 50 and over).
Effective 2020-01-01Source: Notice 2019-59 (IRS)Verified 2026-09-04
Compared with 2019
| Item | 2019 | 2020 | Change |
|---|---|---|---|
| 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 deferred compensation plans sponsored by state or local government employers or tax-exempt organizations under Section 457 of the Internal Revenue Code.
What changed this year, and why
The elective deferral limit under Section 457(e)(15) for deferred compensation plans of state and local governments and tax-exempt organizations increased from $19,000 in 2019 to $19,500 for 2020, effective January 1, 2020.
Common questions
- What is a Section 457 deferred compensation plan?
- These are deferred compensation plans offered by state and local governments and tax-exempt organizations under Section 457 of the Internal Revenue Code. Employees may defer a portion of their pay into the plan on a pre-tax basis.
Your limit is the lesser of the dollar cap and your includible compensation
The deferral limit for 2020 is the lesser of your includible compensation or $19,500. This means you cannot defer more than you earned, even though the dollar cap is $19,500. Includible compensation generally equals your Form W-2 wages plus any elective deferrals you made during the year. It typically includes wages, salaries, fees for professional services, and certain employer-provided fringe benefits. If your includible compensation is less than $19,500, your maximum deferral is limited to that lower amount.
Limit for deferrals under section 457 plans. 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 $19,500 in 2020.
Publication 525 (2020), Taxable and Nontaxable Income (IRS)
The special catch-up in the last 3 years before normal retirement age
During the last 3 years ending before you reach normal retirement age under your section 457 plan, your employer's plan may allow you to defer more than the standard annual limit. If the plan permits this special catch-up, your limit becomes the lesser of two amounts: either twice the basic annual limit ($39,000 for 2020), or the basic annual limit plus any unused portion of prior years' limits. You may only use the second method - the basic limit plus prior-year unused amounts - if you are not also using the age 50-or-over catch-up contributions. This means you cannot combine the 3-year catch-up with the age 50 catch-up; you must choose whichever gives you the greater deferral room. The plan must specifically provide for this increased limit, so not all participants automatically qualify.
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 ($39,000 for 2020), 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 (2020), Taxable and Nontaxable Income (IRS)
The age 50 catch-up, and who can use it
If you participate in a governmental section 457 plan and reached age 50 by the end of the year, you may be eligible for an additional catch-up contribution. To qualify, no other elective deferrals can be made for you to the plan for the year because of limits or restrictions imposed by the plan itself. If you meet both conditions, your deferral limit becomes the lesser of your includible compensation or $19,500, plus an additional $6,500. This raises your potential maximum deferral beyond the standard limit. The age 50 catch-up is available only through governmental section 457 plans and is separate from the other pre-retirement catch-up provision. You cannot use both catch-up provisions at the same time; you must choose whichever gives you the higher deferral limit.
Catch-up contributions. You can gener- ally 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 $19,500, plus $6,500.
Publication 525 (2020), Taxable and Nontaxable Income (IRS)
The window to pull out an excess deferral closes April 15
If your elective deferrals to a governmental section 457(b) plan exceed the $19,500 limit for 2020, you must notify the plan by the date it requires. The plan must then distribute the excess amount, plus any income it earned, by April 15 of the year after the year of the deferral. If you participate in more than one plan, you can have the excess paid out of any plan that permits these distributions, but you must notify each plan of the amount to be paid from that particular plan. You must also include the excess deferral in your income for the year of the deferral and add it to your wages on your tax return.
The plan must then 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 (2020), Taxable and Nontaxable Income (IRS)
There is no form to file - your employer reports it on your W-2
Under IRS Publication 525 for 2020, there is no form you need to file to report your elective deferrals to a governmental section 457(b) plan. Instead, your employer handles the reporting. Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12 of your W-2. This means the deferral is reported to the IRS through your W-2, not through a separate form you file yourself.
Reporting by employer. 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 (2020), Taxable and Nontaxable Income (IRS)
The 3-year catch-up lets you use limit you did not use in earlier years
A governmental 457(b) plan may let a participant use the special 3-year catch-up during the 3 years right before the plan's normal retirement age. In those years the participant may defer up to the lesser of the ordinary elective deferral limit, or the basic annual limit plus whatever part of the basic limit the participant did not use in earlier years. That second option is what lets someone who deferred less than the maximum in past years make up the difference once they reach the final stretch before retirement, rather than losing that room permanently.
Special 457(b) catch-up contributions, if permitted by the plan, allow a participant for 3 years prior to the normal retirement age (as specified in the plan) to contribute the lesser of: the elective deferral limit ($23,000 in 2024; $22,500 in 2023; $20,500 in 2022; $19,500 in 2020 and in 2021). 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)
Retirement Topics - 457(b) Contribution Limits (IRS)
Leave the excess in the plan and it is taxed twice
Under IRS Publication 525 for 2020, if you leave an excess deferral in your governmental section 457(b) plan instead of having it distributed, you face a significant tax consequence. The excess amount was already included in your income for the year of the deferral. If you don't take it out, you cannot include it in the cost of the contract even though you already included it in your income. Therefore, you are taxed twice on the excess deferral left in the plan - once when you contribute it, and again when you receive it as a distribution (unless the excess deferral was a designated Roth contribution). This double taxation makes it important to correct excess deferrals promptly.
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 (unless the excess deferral was a designated Roth contri- bution).
Publication 525 (2020), 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 2019-59 (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 $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.