How the Contribution Limits Work When You’re in Two Plans

By Ian Berger, JD
IRA Analyst
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The start of the new year is a good time for a refresher course on the contribution limits that apply when someone is in two different retirement plans at the same time or at different times within the same year (e.g., after changing jobs). The rules are challenging because there are two different contribution limits to worry about – the “elective deferral limit” and the “overall contribution limit.”

Elective Deferral Limit

The elective deferral limit is the maximum amount that an employee can defer in any one calendar year. The limit is based on the total pre-tax and Roth contributions made to ALL 401(k), 403(b) and SIMPLE IRA plans (but not 457(b) plans) during the year. Deferrals to all plans are aggregated, even if the plans are sponsored by companies considered unrelated under the tax rules. For 2024, the elective deferral limit is $23,000, or $30,500 if age 50 or older.

Example 1: Kyle, age 48, has a regular job with General Hospital that sponsors a 403(b), and he also has a solo 401(k) through a landscaping side business. The most that Kyle can defer between the two plans for 2024 is $23,000. It doesn’t matter that General Hospital and the landscaping company are unrelated businesses.

There are two important exceptions to this rule. Traditional (non-Roth) after-tax contributions, if allowed by the plan, don’t count towards the $23,000/$30,500 deferral limit – although they do count towards the overall contribution limit (see below). And, 457(b) plans have their own separate limit. This can be a windfall for employees like hospital executives or high-ranking medical staff who are eligible for both a 457(b) and a 403(b) plan. They can defer up to the maximum deferral limit to each plan.

Overall Contribution Limit

The overall contribution limit is sometimes referred to as the “annual additions limit” or “415 limit.” This limit is the maximum amount of ALL contributions that can be made to a plan by, or for, any employee in any year. Both the employee’s own contributions – pre-tax, Roth or after-tax (non-Roth) – and the employer’s contributions – matching or nonelective (across-the-board) – are counted. For 2024, the overall contribution limit is $69,000 (or up to $76,500 if age 50-or-over extra deferrals are made).

Special aggregation rules apply. Generally, contributions made to two plans sponsored by the same company – or different businesses considered as one by the IRS – are combined for the overall limit. (Aggregation doesn’t apply if one of the plans is a 457(b) and usually doesn’t apply when the two plans are a 401(k) and a 403(b)). But if someone is in two plans maintained by separate companies, contributions generally aren’t combined, and the employee gets the benefit of a separate overall limit for each plan. (Aggregation does apply if both plans are 403(b) plans.)

Example 2: General Hospital and Kyle’s landscaping business (from Example 1) are considered unrelated businesses. So, for 2024, Kyle has a separate overall limit for the 403(b) and 401(k) plan and could theoretically receive a total of $138,000 ($69,000 x 2) in combined contributions – although practically that would be difficult to achieve. Kyle’s combined pre-tax and Roth contributions between the two plans would still be limited to $23,000.