2021 457(b) Contribution Limit
The 2021 457(b) Contribution Limit is $19,500.
Effective 2021-01-01Source: Notice 2020-79 (IRS)Verified 2026-08-29
Compared with 2020
Every figure on this page is unchanged from 2020.
| Item | 2020 | 2021 | Change |
|---|---|---|---|
| Deferral limit | $19,500 | $19,500 | +$0 (+0.0%) |
Who it applies to
Participants in deferred compensation plans sponsored by state and local government employers and tax-exempt organizations.
What changed this year, and why
For 2021, the limitation on deferrals under the Internal Revenue Code section governing deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $19,500. This limit applies to elective deferrals made during the 2021 calendar year.
Common questions
- What is the contribution limit for these deferred compensation plans in 2021?
- The deferral limit for 2021 is $19,500.
- Did the limit change from the prior year?
- No. The limit remained unchanged at $19,500 for 2021.
Your limit is the lesser of the dollar cap and your includible compensation
For 2021, the basic elective deferral limit for participants in a section 457 plan is $19,500. However, you cannot defer more than your includible compensation, so the actual ceiling is the lesser of these two figures. Includible compensation generally equals your Form W-2 wages plus any elective deferrals you made. This means that if your includible compensation for the year is below $19,500, your deferral limit is capped at that lower amount, not the full dollar cap. The rule applies to employees of state or local governments and tax-exempt organizations covered by a section 457 deferred compensation plan.
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 2021.
Publication 525 (2021), Taxable and Nontaxable Income (IRS)
The special catch-up in the last 3 years before normal retirement age
During the last 3 years before you reach normal retirement age under your section 457 plan, the plan may offer a special catch-up provision that lets you defer more than the standard $19,500 limit. If the plan allows it, your maximum deferral becomes the lesser of two computed amounts. The first option is twice the annual limit, which equals $39,000 for 2021. The second option is the basic annual limit plus any portion of the basic limit that you did not use in prior years. You cannot combine the age 50-or-over catch-up with this three-year pre-retirement catch-up; the second option is only available if you are not using the age 50 catch-up contributions. The plan determines which formula applies, and the ultimate cap is the lesser result.
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 2021), 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 (2021), 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 you reached age 50 by the end of the year, you may be eligible for an additional age 50 catch-up contribution on top of the standard $19,500 deferral limit. To qualify, no other elective deferrals can be made for you to the plan for the year because of plan limits or restrictions. If you meet both conditions, your deferral limit becomes the lesser of your includible compensation or $19,500, plus $6,500. This means the maximum catch-up-enhanced limit is $19,500 plus $6,500. Note that if you are near normal retirement age and your plan provides the special pre-retirement increased limit discussed in the three-year catch-up provision, that higher limit may apply instead of this age 50 catch-up.
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 (2021), 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 2020-79 (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 $19,500.