2023 457(b) Contribution Limit
For 2023, the 457(b) Contribution Limit figures are $22,500 (Deferral limit) and +$7,500 (Catch-up limit, age 50 and over).
Effective 2023-01-01Source: Notice 2022-55 (IRS)Verified 2026-09-04
Compared with 2022
| Item | 2022 | 2023 | Change |
|---|---|---|---|
| Deferral limit | $20,500 | $22,500 | +$2,000 (+9.8%) |
| Catch-up limit, age 50 and over | +$6,500 | +$7,500 | +$1,000 (+15.4%) |
Who it applies to
Participants in deferred compensation plans of state and local governments and tax-exempt organizations.
What changed this year, and why
Effective January 1, 2023, the elective deferral limit for deferred compensation plans of state and local governments and tax-exempt organizations increased to $22,500.
Common questions
- What is the deferral limit for 2023?
- Effective January 1, 2023, the maximum amount an eligible employee may defer into a deferred compensation plan maintained by a state or local government or a tax-exempt organization is $22,500.
- Did the limit change from 2022?
- Yes. The limit increased from the prior year to $22,500 for 2023.
Your limit is the lesser of the dollar cap and your includible compensation
Participants in a section 457 plan - whether sponsored by a state or local government or by a tax-exempt organization - cannot defer more than the lesser of their includible compensation or $22,500 in 2023. This means your limit is always the smaller of the annual dollar cap of $22,500 and the compensation you earned that year from the employer maintaining the plan. Even if the dollar cap would permit a larger deferral, your contributions cannot exceed your includible compensation. Includible compensation generally equals your Form W-2 wages plus any elective deferrals you make, and it typically includes wages, salaries, fees for professional services, and certain employer-provided transportation fringe benefits. If your includible compensation falls below $22,500, that lower figure becomes your ceiling for the year. This rule applies before any catch-up provision is considered; the base limit is always tested against both the dollar amount and the compensation amount first.
If you're a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organ- izations), you should have deferred no more than the lesser of your includible compensation or $22,500 in 2023.
Publication 525 (2023), Taxable and Nontaxable Income (IRS)
The special catch-up in the last 3 years before normal retirement age
A section 457 plan may offer a special catch-up during the last 3 years before the participant reaches normal retirement age under the plan. If the plan provides this benefit, the participant's deferral limit becomes the lesser of two alternative calculations: (1) twice the basic annual limit, which is $45,000 for 2023; or (2) the basic annual limit of $22,500 plus any portion of the basic limit that went unused in prior years. The second option is available only when the participant is not also using the age 50-or-over catch-up contributions. This provision is designed to help participants who were unable to defer up to the full annual limit in earlier years make up some of that shortfall as they approach retirement. The increased limit is optional and depends entirely on whether the employer's plan includes it.
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 ($45,000 for 2023), 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 (2023), Taxable and Nontaxable Income (IRS)
The age 50 catch-up, and who can use it
Participants in a governmental section 457 plan who have reached age 50 may be eligible for additional catch-up deferrals beyond the standard limit. To qualify, two conditions must be met: the participant must have reached age 50 by the end of the year, and no other elective deferrals can be made for the participant to the plan for the year because of limits or restrictions imposed by the plan. If both conditions are satisfied, the participant's deferral limit becomes the lesser of includible compensation or $22,500, plus an additional $7,500. However, if the participant is also within the pre-retirement window and the plan provides the special increased limit, that alternative catch-up may be even higher. The age 50 catch-up is a separate provision from the pre-retirement catch-up and cannot be used simultaneously with it. This catch-up gives eligible older participants extra room to save for retirement beyond what the basic deferral cap alone would allow.
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 lim- its or restrictions. If you qualify, your limit can be the lesser of your includible compensation or $22,500, plus $7,500.
Publication 525 (2023), Taxable and Nontaxable Income (IRS)
The window to pull out an excess deferral closes April 15
If you defer more than $22,500 into a governmental section 457(b) plan in 2023, the excess is an excess deferral. You must notify your plan of the amount you want pulled out, and if you participate in more than one plan, you can have the excess paid out of any of them that permit these distributions. The plan must then distribute the excess, plus any income that amount earned while in the plan, by April 15 of the year after the year of the deferral. You also must include the excess deferral in your income for the year you made it. File Form 1040 or 1040-SR to add the excess deferral amount to earned income on line 1h. Missing the April 15 deadline means the excess stays in the plan and triggers a second tax, so acting quickly keeps the money from being taxed again when you eventually take it out as a distribution.
You must include the excess deferral in your income for the year of the deferral. File Form 1040 or 1040-SR to add the excess deferral amount to earned income on line 1h.
Publication 525 (2023), Taxable and Nontaxable Income (IRS)
There is no form to file - your employer reports it on your W-2
Employers do not file a separate form to report your 457(b) deferrals. Instead, your employer generally should not include elective deferrals in your wages in Form W-2, box 1. Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. The W-2 your employer gives you is the record of your deferrals for the year; you do not file any additional form to report them to the IRS. If you also made designated Roth contributions to your plan, those amounts are included in your wages in box 1 but are still shown in box 12 with a separate code. Keep your W-2 as proof of your contributions for the 2023 limit of $22,500. If you notice your deferrals are not correctly reported on your W-2, contact your employer's payroll department to correct the boxes before you file your return.
Reporting by employer. Your employer gen- erally shouldn't include elective deferrals in your wages in Form W-2, box 1. 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 (2023), Taxable and Nontaxable Income (IRS)
Leave the excess in the plan and it is taxed twice
For 2023, the basic elective deferral limit for a governmental section 457(b) plan is $22,500. If you defer more than that amount, the excess is an excess deferral. If you do not withdraw the excess by the April 15 deadline, it remains in the plan and triggers a double tax. The excess deferral is taxed twice: once in the year you contributed it (because you must include it in your income for that year), and again when you eventually receive it as a distribution from the plan. You cannot treat the excess as part of the cost of the contract even though you already included it in income. The only exception is if the excess deferral was a designated Roth contribution, in which case the double tax does not apply. To avoid being taxed twice, you must have the plan distribute the excess amount, along with any income earned on it, by April 15 of the following year.
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 (2023), 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 listed in (1) through (3), earlier, unless you are 50 or older. The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later.
Publication 525 (2023), 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 2022-55 (IRS)
- Deferral limit
The limitation on deferrals under section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $20,500 to $22,500.
- Catch-up limit, age 50 and over
The dollar limitation under section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in section 401(k)(11) or section 408(p) for individuals aged 50 or over is increased from $6,500 to $7,500.