2023 457(b) Contribution Limit
The 2023 457(b) Contribution Limit is $22,500.
Effective 2023-01-01Source: Notice 2022-55 (IRS)Verified 2026-08-29
Compared with 2022
| Item | 2022 | 2023 | Change |
|---|---|---|---|
| Deferral limit | $20,500 | $22,500 | +$2,000 (+9.8%) |
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)
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.