Tax-Sheltered Annuity Plans (403(b) & 457(b)) Limit on Elective Deferrals

Internal Revenue Service Publication 571 for 2023 defines the Limit on Elective Deferrals and sets a General Limit for the tax year.  SchoolFi pre-sets the General Limit for the calendar year based on the Internal Revenue Service publication.  

Limit on Elective Deferrals (per the IRS):

This is a limit on the amount of contributions that can be made to your account through a salary reduction agreement.

A salary reduction agreement is an agreement between you and your employer that allows for a portion of your compensation to be directly invested in a 403(b) account on your behalf. You can enter into more than one salary reduction agreement during a year.

More than one 403(b) account.  

If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts maintained by your employer. If you participate in more than one 403(b) plan maintained by different employers, you don’t need to combine amounts for annual addition limits.

403(b) plan and another retirement plan. 

If, during the year, contributions in the form of elective deferrals are made to other retirement plans on your behalf, you must combine all of the elective deferrals to determine if they are more than your limit on elective deferrals. The limit on elective deferrals applies to amounts contributed to:

• 401(k) plans, to the extent excluded from income;
• Roth contribution programs;
• Section 501(c)(18) plans, to the extent excluded from income;
• Savings incentive match plan for employees (SIMPLE) plans;
• Salary reduction simplified employee pension (SARSEP) plans; and
• All 403(b) plans.

Roth contribution program. 

Your 403(b) plan may allow you to designate all or a portion of your elective deferrals as Roth contributions. Elective deferrals designated as Roth contributions must be maintained in a separate Roth account and aren’t excludable from your gross income.

Participation in a qualified (457) plan.

If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control to determine the total annual additions.

General Limit.

Under the general limit on elective deferrals, the most that can be contributed to your 403(b) account through a salary reduction agreement is $22,500 for 2023 and $23,000 for 2024.

Catch-up Contributions.

If you will be age 50 or older by the end of the year, you may also be able to make additional catch-up contributions. These additional contributions can’t be made with after-tax employee contributions.

You are eligible to make catch-up contributions if:

• You will have reached age 50 by the end of the year,
• Your employer's plan document allows for catch-up contributions, and
• The maximum amount of elective deferrals that can be made to your 403(b) account have been made for the plan year.

The maximum amount of catch-up contributions is the lesser of:

• $7,500 for 2023 and $7,500 for 2024; or
• The excess of your compensation for the year, over the elective deferrals that aren’t catch-up contributions.