What Are the 2025 Maximum Deferral Limits When 403(b), 457(b) Plans Are Present?

Q: Can you update your prior Ask the Experts column on the maximum deferral limits when both a 403(b) and 457(b) plan are in place to reflect the new limits for 2025?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Certainly! The 2025 limit is quite a bit of money, with the absolute maximum permissible deferral dependent on which catch-up contributions a plan sponsor offers (including a new catch-up election for 2025) and an employee’s eligibility for those provisions. In 2025, eligible employees who elect to make deferrals to both a 403(b) and 457(b) plan will generally be able to contribute up to $23,500 in deferrals to their 403(b) plan and another $23,500 in deferrals to their 457(b) plan, for a total of $47,000, provided that the employee earns at least $47,000 in compensation. (Note: If an employee receives employer contributions to their 457(b) plan, the $23,500 limit for that plan would be reduced by those contributions.)

If an employee is at least 50 years old by the end of 2025, and both the 403(b) and 457(b) plans offer an age-50+ catch-up election, the total deferral limit would increase to $62,000 ($23,500 + $7,500 catch-up to each plan for 2025). Please note that the age-50+ catch-up election is only available to 457(b) plans that are governmental plans. If the 457(b) plan is not a governmental plan, an age-50+ catch-up is not permitted, and therefore, the combined limit would be $54,500 ($23,500 + $7,500 catch-up to the 403(b) plan + $23,500 to the 457(b) plan). Also, a new catch-up election referred to as the age-60 super catch-up, will be introduced in 2025. For employees who are at least 60 years of age, but no older than 63 years of age as of December 31, 2025, the catch-up will be $11,250, instead of $7,500. Thus, if both the 403(b) and 457(b) plans offer the age-60 catch-up election, an eligible employee could defer up to $69,500 ($23,500 + $11,250 catch-up to each plan for 2025). If the 457(b) plan is not a governmental plan, the combined limit would be lowered to $58,250 ($23,500 + $11,250 catch-up to the 403(b) plan + $23,500 to the 457(b) plan).

There are some more obscure elections which a small number of employees may use to further increase their contribution limits, provided the plan offers them. The first is the 457(b) three-year catch-up election, which allows the employee to contribute the lesser of twice the 457(b) limit or the 457(b) limit plus any unused limitations in prior years. If the plan offers the election and the employee qualifies, that could increase the maximum dollar deferral limit in the 457(b) plan to $47,000, making it possible for an employee to defer a total of $78,000 ($23,500 in deferrals + $7,500 in catch-up to the 403(b) plan + $23,500 in deferrals + $23,500 in three-year catch-up to the 457(b) plan) to both plans if the employee is older than 50. (Note: the three-year catch-up and the age-50+ catch-up cannot be used in the same year in the 457(b) plan.) If the plan permits, the age-60 super catch-up, an eligible employee could defer a whopping $81,750 into the combined plans ($23,500 in deferrals + $11,250 in catch-up to the 403(b) plan + $23,500 in deferrals + $23,500 in three-year catch-up to the 457(b) plan).

The second election is the 403(b) plan 15-year catch-up election, which would allow for up to an additional $3,000 to be deferred to the 403(b) plan (for a total of $84,750 when added to the scenario described above), if the plan permits the election and the employee qualifies. However, this particular election is so difficult for plan sponsors to administer that many have opted not to offer it.

The 2025 section 415(c) limit is $70,000. Keep in mind that as an employee’s deferrals increase, the section 415(c) limits may come into play, depending on the employer contribution to the 403(b) plan.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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