Both 403(b) and 457(b) plans were designed to help public‐school and other tax‐exempt employees—“educators” in the broad sense—save for retirement on a tax‐advantaged basis, but they differ somewhat in whom they cover and how contributions are treated. They also differ in some special catch up or additional contribution features. Following is a summary of the eligibility requirements, deferral limits and certain special provisions that often apply to educators.
403(b) Plans (Tax‐Sheltered Annuity Plans)
Eligibility requirements
Employer type. These plans are available to employees of certain “exempt organizations” such as public and private schools, colleges, universities, public hospitals and many 501(c)(3) organizations. In the educational arena, this generally means that teachers, administrators and other staff working for accredited public or tax exempt educational institutions are eligible.
Employee status. To participate in a 403(b) plan, you must be a bona fide employee of the sponsoring organization. For detailed guidance on eligibility—including nondiscrimination—and the features of these plans, see IRS Publication 571, “Tax Sheltered Annuity Plans (403(b) Plans),” and the comparison charts found in IRS Publication 4406.
Contribution limits and special provisions
Elective deferral limits. For calendar year 2024, participants generally may defer up to $23,000 of elective contributions (with annual adjustments for inflation in subsequent years).
Catch up contributions come in two categories.
- Age based catch up. Educators age 50 or older can often contribute an additional amount (commonly around $7,500 for 2024) on top of the standard deferral limit.
- Service based catch up (“15 year rule”). Many 403(b) plans offered to educators include an additional catch up feature for long term employees. For example, if you have at least 15 years of service with a qualifying educational institution (such as a public school district), the plan may permit an extra elective deferral above the standard limit.
457(b) Plans
Eligibility Requirements
Employer type. Section 457(b) plans are available to employees of state and local governments and certain tax‐exempt nongovernmental entities, including public school employees and employees of other governmental educational institutions.
Employment status. To qualify, you generally must be employed by an eligible state or local government (or eligible tax exempt organization) that offers a deferred compensation plan under section 457. In many cases, public school districts that sponsor such plans make them available to their teaching and administrative staff.
Contribution limits and special provisions
- Elective deferral limit. Like 403(b) plans, for 2024 the elective deferral limit for a 457(b) plan is generally $23,000.
- Additional “catch up” options. Some 457(b) plans allow additional catch up contributions if you are within three years of your normal retirement age. Under such provisions, you can defer more than the basic limit if your plan rules allow you to do so and your compensation supports a higher deferral.
- Tax timing. A primary feature of 457(b) plans is that your contributions are not included in taxable income until you receive distributions, which can be particularly beneficial if you postpone distributions until retirement when your income and tax bracket are lower.
Special benefits for educators
Because many educators work for public schools or similar institutions that sponsor both types of plans, the following considerations are especially relevant.
- Concurrent participation. In many cases, educators can contribute to both a 403(b) and 457(b) plan concurrently. The limits on each plan are separate, so you might defer up to the full elective deferral limit in each plan (subject to your overall compensation).
- Automatic enrollment and safe harbor provisions. To boost participation among rank and file employees, many educational institutions design their 403(b) plans with automatic-enrollment features or safe harbor provisions (which protect against penalties if certain conditions are met).
- Tax deferral and tax free growth. Contributions to both 403(b) and 457(b) plans grow on a tax deferred basis until you take distributions. In the case of designated Roth contributions (if offered by your plan), qualified distributions can be tax free.
- Plan specific adjustments. Because contribution limits and catch up provisions are subject to annual adjustments and may differ slightly from one plan to another, it is important to review your sponsoring plan’s summary plan description.
The following table lists the most common retirement plans, who is eligible, and how much a participant can contribute to the plan each year. The plans all provide some form of tax benefit and require participants to be responsible for investing their contributions.
| Plan Name | Who is Eligible |
Annual Contribution Limits for 2025 |
|---|---|---|
|
403(b) or Tax-Sheltered Annuity (TSA) |
Employees in public education and certain non-profit organizations |
$23,500 plus $7,500 catch-up for those age 50 and older or $11,250 catch-up for those age 60-63 |
|
457(b) |
Employees of state and local government agencies and certain non-profit organizations |
$23,500 plus $7,500 catch-up for those age 50 and older or $11,250 catch-up for those age 60-63 |
|
401(k) |
Employees of for-profit businesses that sponsor a plan |
$23,500 plus $7,500 catch-up for those age 50 and older or $11,250 catch-up for those age 60-63 |
|
401(a) |
Employees of governmental agencies, educations institutions and non-profit organizations |
$70,000 (combined employee and employer contributions) |
|
Individual Retirement Account (IRA) Traditional and Roth |
Anyone with earned income up to certain maximum limits |
$7,000 plus $1,000 catch-up for those age 50 and older |
In summary, educators working for qualifying public or tax exempt educational institutions are generally eligible for 403(b) plans (with a 2024 deferral limit of $23,000 plus catch up options based on age and years of service) and for 457(b) plans (with a similar deferral limit and possible additional catch up if nearing retirement). The exact limits and available additional contributions (such as the special 15 year catch up for long term educators) are set forth in your plan documents and are subject to adjustments by the IRS on a cost of living basis. For specific details applicable to your situation, review your employer’s plan documents.
Get the details
The IRS has more information on these and other retirement plans. Refer to the following IRS publications.
- IRS Publication 571 [PDF], “Tax Sheltered Annuity Plans (403(b) Plans)”
- IRS Publication 4406 [PDF], “Compare features of retirement plans for tax exempt and government employers”
- IRS Publication 525 (2024) and related IRS guidelines provide general background on income and benefits, including treatment of elective deferrals.
For informational purposes only. Not intended as legal or tax advice.
This information is accurate as of March 1, 2025.
