Sponsor Offers a 403(b), 401(k) and 457(b): Can an Employee Contribute to All Three?

“I just started working in the benefits department of a large private health care system (not governmental or church-related). The system sponsors a 403(b), 401(k) and a 457(b) plan, and I’ve been informed that I can participate in all three plans! Is that correct?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

As hard as it may be to believe, if you are a select management or highly compensated employee, this may indeed be possible!

By law, 457(b)s sponsored by private tax-exempts, such as your health care system, are only available for select management or highly compensated employees. If you are in such a classification of employees listed as eligible to contribute to that plan in the 457(b) plan document, then you may indeed contribute to that plan.

As for the employer-sponsored 403(b) and 401(k) plans, all employees generally have the right to voluntarily contribute to the 403(b) plan, though the plan has the right to exclude certain limited groups of employees such as those who are allowed to contribute to the 401(k) plan. Thus, you should check the plan language to confirm your eligibility. Similarly, you should check the language of the 401(k) plan to see if you are eligible as well, as the 401(k) plan has more latitude to exclude employees from participation.

Keep in mind that, even if it turns out that you may contribute to all three plans, the 401(k) and 403(b) plans have a single combined 402(g) elective deferral limit, so that maximum you may contribute to both of those plans combined is $19,500 (indexed) in 2021, and $26,000 if you are age 50 or older as of 12/31/21. However, the 457(b) plan has a separate $19,500 limit, so you can defer $19,500 ($26,000 if age 50 or older) into any combination of the 403(b) and 401(k) plan, plus up to $19,500 into the 457(b) plan. Note that if you are a highly compensated employee (defined as someone who earned $130,000 or more in 2020), you may be further limited in the amount that you may defer to your 401(k) plan.

As for how much you wish to put into which plan, you should check the plan features to assist you in making this decision. For example, one of the plans might offer an employer matching contribution to you, so you would want to contribute at least the minimum amount to that plan necessary to receive the maximum match.

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.