2020 457(b) Contribution Limit
The 2020 457(b) Contribution Limit is $19,500.
Effective 2020-01-01Source: Notice 2019-59 (IRS)Verified 2026-08-29
Compared with 2019
| Item | 2019 | 2020 | Change |
|---|---|---|---|
| Deferral limit | $19,000 | $19,500 | +$500 (+2.6%) |
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)
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.