The annual contribution cap for a 403(b) is typically the same as for a 401(k). Unlike a 401(k), however, your 403(b) might allow you to invest more than the standard limit if you have 15 years of service.
Employee Basic Amount
As of 2015, if you are under 50, the standard annual limit for a 403(b) account is $18,000. You can put aside an additional catch-up amount of $6,000 if you are 50 or older. The annual limits are the same for traditional and Roth 403(b) accounts.
Employers do not have to fund employees' 403(b) accounts. If your employer chooses to contribute, the total limit -- including employer and employee amounts -- is the lesser of:
- $53,000 if you are under 50
- $59,000 if you are 50 or older
- The total compensation, including benefits, for your most recent year of service.
Employers that are not exempt from the Employee Retirement Income Security Act of 1974 must provide 403(b) plan participants with a summary plan document each year. The SPD explains how the plan operates and includes employee and employer contribution limits. If your employer refuses to give you a copy of the SPD, contact the U.S. Department of Labor for assistance.
15-Year Service Rule
If you have 15 years of service with one of the following IRS-qualified entities, you may be able contribute more than the standard amount:
- Public school system
- Health and welfare service agency
- Home health service agency
- Organization associated with a church.
Your employer does not have to provide this option. If it chooses to offer the 15-year rule, you can contribute an additional $3,000 each year, up to the lifetime maximum of $15,000. You may qualify for this increase if your average annual contributions are less than $5,000.
Years of service are calculated according to the time you spent working. For example, if you worked six months in each of the past two years, you have one year of service.
If you qualify for both the over 50 catch-up and 15-year rule, any contribution greater than the standard limit will first be applied to the 15-year rule. Contributions over the standard and 15-year rule amounts go toward the over 50 catch-up amount.
If you exceed your 403(b) contribution limits, you can ask your plan administrator for a payout of your excess deferrals. To avoid double taxation, request the payout by March 1 following the year in which the overage occurred. The plan administrator must refund you the excess amount by April 15. In this case, the excess amount is taxed only once, for the year in which the over-contribution happened. Otherwise, the excess stays in your 403(b) account, and is taxed twice upon withdrawal -- once for the year in which the excess happened and once in the year of distribution.