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How Much Salary Can You Defer if You’re Eligible for More than One Retirement Plan?

The amount of salary deferrals you can contribute to retirement plans is your individual limit each calendar year no matter how many plans you're in. This limit must be aggregated for these plan types:

  • 401(k)
  • 403(b)
  • SIMPLE plans (SIMPLE IRA and SIMPLE 401(k) plans)
  • SARSEP

If you’re in a 457(b) plan, you have a separate limit that includes both employee and employer contributions.

Make sure you don’t exceed your individual limit. If you do and the excess isn’t returned by April 15 of the next year, you could be subject to double taxation:

  • once in the year you deferred your salary, and
  • again when you receive a distribution.

Elective deferral limit

The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $17,500 in 2014 and $18,000 in 2015. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. 

Example
You’re 40 years old and defer $2,500 in pre-tax and designated Roth contributions to your company’s 401(k) plan in 2014. You terminate employment and go to work for an unrelated employer and participate in your new employer’s 401(k) plan immediately. The maximum you may defer to your new employer’s plan in 2014 is $15,000 (your $17,500 individual limit - $2,500 that you’ve already deferred to your former employer’s 401(k)). The amount you can defer to both plans can’t exceed your individual limit for that year.

Age 50 catch-ups

If you are age 50 or older by the end of the year, your individual limit is increased by $5,500 in 2014 and $6,000 in 2015 (the catch-up contribution amount). This means your individual limit increases from $17,500 to $23,000 in 2014 and from $18,000 to $24,000 in 2015 even if neither plan allows age-50 catch-up contributions (IRC Section 414(v) and Treas. Regs. 1.402(g)-2). 

Example
You’re 50 years old and participate in both a 401(k) and a 403(b) plan. Both plans permit the maximum contributions for 2014, $17,500; but the 403(b) doesn’t allow age-50 catch-ups. You can still contribute a total of $23,000 in pre-tax and designated Roth contributions to both plans. Your contributions can’t exceed either:

    1. your individual limit plus the amount of age-50 catch-up contributions, or
    2. the maximum contribution in 2014 for that plan type (for example, you couldn’t contribute the entire $23,000 to the 403(b) plan because that 403(b) plan only allows a maximum contribution of $17,500 in 2014).

Deferrals limited by compensation

Although plans may set lower deferral limits, the most you can contribute to a plan under tax law rules is the lesser of:

  • the allowed amount for that plan type for the year, or
  • 100% of your eligible compensation defined by plan terms (includible compensation for 403(b) and 457(b) plans).

If you’re self-employed, generally your compensation is your net earnings from self-employment (see Calculating Your Own Retirement Plan Contribution and Deduction).

Example
You are 52 years old and participate in a 401(k) plan with Company #1 and a SIMPLE IRA plan with an unrelated employer Company #2. You receive $10,000 in compensation in 2014 from Company #1 and another $10,000 from Company #2. You can’t defer more than $10,000 to either plan (for example, $12,000 to the 401(k) plan and $8,000 to the SIMPLE IRA plan) because your deferrals to each employer’s plan can’t exceed 100% of your compensation from that employer.

15-year catch-up deferrals in 403(b) plans 

Your individual limit may be increased by as much as $3,000 if your 403(b) plan allows a 15-year catch-up contribution. The 15-year catch-up is separate from the age-50 catch-up. If you’re eligible and the plan allows both types of catch-ups, your contributions above your annual limit are considered to have been made first under the 15-year catch-up.

See the 403(b) contribution limits and Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans), for more information on 403(b) contributions and catch-ups.

Plan-based limits on elective deferrals 

Although rare, your plan may limit the amount you can defer to an amount less than the allowed deferrals for that plan type for the year.

A plan with a 401(k) feature may also reduce the amount you can defer to ensure that the plan meets nondiscrimination requirements. The plan may return some of your deferrals even if they don’t exceed your individual limit.

457(b) plan participants

You have a separate deferral limit if you’re also eligible to participate in a 457(b) plan. See 457(b) Plan Contribution Limits. It is not combined with your deferrals made to a 403(b) or other plans.

Elective deferrals - In 2014, you may defer the lesser of $17,500 ($18,000 in 2015) or 100% of your includible compensation to a 457(b) plan. The plan may also permit catch-up contributions.

Catch-up deferrals - A governmental 457(b) plan may allow age-50 catch-ups of an additional $5,500 in 2014 and $6,000 in 2015. 

Special 457(b) catch-up deferrals - the plan may allow a special “last 3-year catch-up,” which allows you to defer in the three years before you reach the plan’s normal retirement age:

  • twice the annual 457(b) limit (in 2014, $17,500 x 2 = $35,000), or
  • the annual 457(b) limit, plus amounts allowed in prior years that you didn’t contribute.

If a governmental 457(b) allows both the age-50 catch-up and the 3-year catch-up, you can use the one that allows a larger deferral but not both.

Example
You’re in a 457(b) and a 403(b) plan,  and each plan allows the maximum deferrals for 2014. You may be able to defer:

  • If you're under age 50: $17,500 to each plan in 2014
  • If you're age 50 or older in a governmental 457(b) plan: $23,000 to each plan if both plans allow age-50 catch-ups ($5,500 additional in 2014)
  • If you're age 50 or older in a nongovernmental 457(b) plan: $23,000 to the 403(b) plan and $17,500 to the 457(b) plan
  • If you're age 50 or over and your 457(b) plan has a 3-year catch up: $23,000 to the 403(b) plan and $35,000 to the 457(b) plan  ($17,500 x 2)
  • If you’ve worked for a qualified organization at least 15 years: you may be eligible to contribute up to an additional $3,000 to the 403(b) plan account

Distribution of excess contributions

If you do exceed your contribution limits, to avoid double taxation, contact your plan administrator and ask them to distribute any excess amounts. The plan should distribute the excess contribution to you by April 15 of the following year (or an earlier date specified in the plan). For information about taxes on excess contributions, see What Happens When an Employee has Elective Deferrals in Excess of the Limits?

When deciding from which plan to request a distribution of excess contributions keep in mind:

  • getting the maximum matching contribution that may be offered
  • type of investments
  • plan fees

Additional resources

 

Page Last Reviewed or Updated: 23-Oct-2014