The most you can contribute as an elective deferral to a 403(b) plan in tax year 2022 is $20,500. This is up from $19,500 in 2021. You can contribute an additional $6,500 as a “catch-up” contribution if you’re age 50 or older. Employers can match an employee’s contribution for the year. The total of elective deferrals and matching contributions is limited to $61,000 for the 2022 tax year—up from $58,000 in 2021. These limits are indexed for inflation, so they can be expected to increase periodically to keep up with the economy.
Historical Limit Increases for 403(b) Plans
This chart can help put it all in historical perspective. You’ll see that limits have crept up incrementally to match inflation and the economy.
Limits Apply to Two Plans
These limits apply to any 403(b) and 401(k) accounts a taxpayer might have during the year. You may have to devote some time to tracking your contributions to your 401(k) and 403(b) plans to make sure that you don’t contribute more than the amount allowed if you have two or more jobs or if you switch jobs in the middle of the year. Failure to pay attention to these limits across accounts can result in significant annual penalties.
Some Tips for Breaking Down the Limit
It might be easiest to break the annual limit into equal dollar amounts per pay period if you plan to contribute the maximum amount allowed. This will allow you to save the same amount each pay period. It will also dollar-cost-average your contributions into your retirement investments. You can do this by taking your annual contribution amount and dividing that total by the number of pay periods you have during the year.
Managing Elective Deferrals
Elective deferrals are treated separately from the employer’s matching contributions. Each has its own limits and tax treatment. Elective salary deferrals can be placed into a tax-deferred traditional 403(b) or a post-tax Roth 403(b) account, or a combination of traditional and Roth accounts. But the total of all salary deferrals must not exceed the annual maximum. Matching funds are always contributed to the tax-deferred portion of your 403(b) plan. The total of your elective salary deferral plus employer matching contributions is limited to $61,000 for 2022. This amount increased by $3,000 from the $58,000 limit that applied in 2021.
