How the Contribution Limits Work When You're in Two Plans
How Contribution Limits Work If You Participate in Two Plans
Many people contribute to more than one retirement plan in a single year, especially after changing jobs or running a side business. When this happens, it’s essential to understand how contribution limits apply. The IRS uses two different thresholds to regulate plan contributions: the elective deferral limit and the overall contribution limit. Both need to be considered when participating in two plans at the same time or within the same calendar year.
Elective Deferral Limit: One Cap for All 401(k), 403(b), and SIMPLE IRAs
The elective deferral limit sets the maximum amount an employee can contribute through salary deferrals in a given year. This limit applies to the total of all pre-tax and Roth contributions across all 401(k), 403(b), and SIMPLE IRA plans. It doesn’t matter whether the plans are maintained by different, unrelated employers. For 2024, the elective deferral limit is $23,000, or $30,500 for individuals age 50 and older who qualify for catch-up contributions.
Consider the case of Kyle, a 48-year-old employee of General Hospital who also runs a landscaping business. Kyle contributes to a 403(b) at his job and also participates in a solo 401(k) plan through his side business. Despite being in two unrelated plans, Kyle cannot exceed the $23,000 limit across both plans in 2024.
Two notable exceptions apply. Traditional after-tax (non-Roth) contributions do not count toward the $23,000 or $30,500 limit, though they do count toward the overall contribution limit. Also, 457(b) plans are subject to separate limits. This means that individuals eligible for both a 403(b) and a 457(b) plan can contribute the full amount to each, essentially doubling their deferral capacity.
Overall Contribution Limit: All Sources of Funds Count
The overall contribution limit, sometimes referred to as the annual additions limit or the Section 415 limit, includes all contributions made to a plan in a calendar year. This total includes employee salary deferrals (pre-tax, Roth, or after-tax) as well as employer contributions such as matches or nonelective amounts. In 2024, the overall contribution limit is $69,000, or $76,500 for individuals who make age-based catch-up contributions.
When determining how this limit applies across multiple plans, aggregation rules come into play. If two plans are sponsored by the same company, or by companies treated as a single employer under IRS rules, contributions to those plans are combined for purposes of the overall limit.
However, if the plans are offered by different and unrelated employers, each plan is generally subject to its own separate overall limit. This gives participants the opportunity to receive up to $69,000 per plan, depending on contribution levels. One common exception to this separation is if both plans are 403(b)s, in which case the limits are aggregated even across unrelated employers.
Returning to Kyle’s example, since General Hospital and his landscaping business are unrelated, each plan has its own overall contribution limit. That means Kyle could theoretically receive up to $69,000 in contributions to each plan in 2024. Achieving that level of contribution would be challenging, but the possibility exists. Nevertheless, his combined elective deferrals across both plans remain capped at $23,000 due to the unified deferral limit.
Frequently Asked Questions
How much can I contribute if I’m in two retirement plans?
You may contribute up to the elective deferral limit—$23,000 in 2024—across all 401(k), 403(b), and SIMPLE IRA plans combined. Each plan may also have its own overall limit depending on whether the employers are related or unrelated.
Do 457(b) contributions count toward the same limit?
No. 457(b) contributions have their own separate limit. If you qualify for both a 403(b) and a 457(b), you can defer the full allowed amount to each.
Can I contribute more than $69,000 if I’m in two unrelated plans?
Yes, but only under specific conditions. If the two plans are maintained by unrelated businesses, the overall contribution limit may apply separately to each plan.
Are after-tax contributions included in the elective deferral limit?
No. Traditional after-tax (non-Roth) contributions do not count toward the elective deferral limit but do count toward the overall contribution limit.
Can I exceed the limit if I change jobs mid-year?
No. If both jobs offer 401(k) or 403(b) plans, your combined deferrals still cannot exceed the annual limit—even if the employers are unrelated.
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.