Understanding retirement plan rules is not easy. This is certainly the case when you contribute to multiple retirement plans in the same year.
You might be surprised to find out that when you contribute to multiple plans, there are aggregation rules that must be followed. As such, it can take time to determine your maximum annual contributions for each plan.
This article discusses the aggregation rules when funding multiple defined contribution plans in a given year. We will explain the rules and offer a few tips. Let’s jump in!
Background
Understanding the nuances of various retirement plans is crucial. We often work with individuals who contribute to multiple plans, so we know a little about complex retirement situations.
Many of our clients work day jobs where they contribute to other 401(k) plans. Some will contribute to non-profit or government retirement plans like 403(b) or 457(b) plans. While they may be maxing out plans at their day job, they’re often are looking to make contributions to a 401(k) and possibly a Mega Backdoor Roth.
One significant challenge that often arises when individuals contribute to multiple plans is the complexity of the aggregation rules. While most defined contribution plans are subject to the same employee deferral and annual contribution limits, the process of integration can be intricate.
For purposes of this article, we will discuss the aggregation rules for the following plans:
- 401(k)
- 403(b)
- 457(b)
- Thrift Savings Plans (TSPs)
We will briefly describe each of these plans below. However, we will first discuss the IRS rules and limits.
IRS Employee Deferral and Annual Contribution Limits
The plans listed above are all defined contribution plans. They all follow under the same annual contribution limits. The contributions are broken down into two specific limits:
- Employee deferral limits (IRC 402(g))
- Annual contribution limits (IRC 415(c))
These contribution limits are noted below:
| 401(k) Contribution Limit for 2026 | Amount |
|---|---|
| Deferral for under age 50 | $24,500 |
| Deferral for age 50-59 & 64+ | $32,500 |
| Deferral for age 60-63 | $35,750 |
| Maximum for under age 50 | $72,000 |
| Maximum for age 50+ | $80,000 |
| Maximum for age 60-63 | $83,250 |
Contribution limits with multiple plans
Let’s first review the general rule when it comes to combining multiple plans and then we can dive into the specifics for 403(b), 457(b), TSP and 457 plans.
General rule
There are a couple general rules when it comes to combining defined contribution plans.
Employee deferral general rule
First of all, when it comes to employee deferral limits, you can generally NOT combine the limit with different plans. This limit is typically per person and per year. As such, it will apply cumulatively to all plans.
For example, if you have already maxed out the deferral limit in your 403(b) plan, you cannot make additional employee deferrals in your solo 401(k) plan. Alternatively, if you contributed $20,000 to your 403(b) plan, you could contribute an add’l $3,500 to your solo 401(k) plan deferral.
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Annual additions general rule
But there is a second “general rule” that we must discuss. Generally, if you contribute to multiple plans under different companies (that you do not control), you do not need to combine the annual contribution limits.
The annual addition limit of $70,000 applies separately to each “unaffiliated employer.” In other words, you have a separate additions limit for each control group.
For example, if you contributed a total of $70,000 into one plan you can generally contribute up to $70,000 in another plan. This is the case even if you may not make a contribution to your employee deferral.
This general rule provides a valuable benefit for small business owners. They can receive safe harbor contributions and/or profit-sharing contributions from their primary employer while still maximizing their annual contribution limit for their solo 401(k) plan.
If you have multiple day jobs, you can benefit from employer contributions without any limitations. It’s a great opportunity!
Two exceptions
401(k) and Thrift Savings Plans (TSPs) plans follow the general rule noted above. However, 457(b) plans and 403(b) plans do not.
403(b) plans are very restrictive. The plans are combined if the participant has a controlling interest in a business that has a solo 401(k). Take a look at what the IRS says about the combination rules in Publication 571:
Is a Cash Balance or Defined Benefit Plan Right For You?
If you are contributing to both a 403(b) plan and a solo 401(k) plan in the same year, the contribution limits require you to treat these plans as if they belong to a single employer’s retirement plan. This means you must combine your employee and employer contributions from both the 403(b) and the solo 401(k). The total combined contributions for both plans are capped at $70,000, with an additional catch-up contribution of $7,500 if you qualify.
The good news is that although the deferral limits for a 457(b) plan and a 401(k) are the same, contributions to a 457(b) plan are not combined with those made to a 401(k) plan. Take a look at the IRS discussion here.
So, you are able to “double-up” on your plan contributions. This is a great opportunity!
Combo rules when you are funding your solo 401k
The table below
| Limit | 401(k) | 403(b) | TSP | 457 |
|---|---|---|---|---|
| Elective Deferral Combined? | Yes | Yes | Yes | No |
| Annual Additions Limit Combined? | No | Yes | No | No |
Key details of each plan
401(k) Plan
- Purpose: Retirement savings plan offered by private-sector employers.
- Eligibility: For employees of for-profit organizations.
- Plan Sponsors: Corporations and businesses.
- Investment Options: Broad range (e.g., mutual funds, ETFs, sometimes individual stocks).
- Employer Contributions: Often includes matching contributions.
- Tax Advantages:
- Traditional: Pre-tax contributions, tax-deferred growth.
- Roth: After-tax contributions, tax-free withdrawals.
- Withdrawals: Subject to income tax and a 10% penalty if taken before age 59½ (some exceptions apply).
- Nondiscrimination Testing: Ensures plan benefits aren’t overly favoring highly compensated employees.
403(b) Plan
- Purpose: Retirement savings plan for employees of public schools, tax-exempt organizations, and some religious institutions.
- Eligibility: For public-sector and nonprofit employees.
- Plan Sponsors: Public schools, colleges, hospitals, 501(c)(3) organizations.
- Investment Options: Limited to annuities and mutual funds.
- Employer Contributions: May include matching, but less common than in 401(k)s.
- Tax Advantages:
- Traditional: Pre-tax contributions, tax-deferred growth.
- Roth: After-tax contributions, tax-free withdrawals.
- Unique Feature: Catch-up contributions for employees with 15+ years of service at the same employer.
- Withdrawals: Similar rules to 401(k) plans.
Thrift Savings Plan (TSP)
- Purpose: Retirement plan for federal employees and uniformed service members.
- Eligibility: Exclusively for federal workers and members of the uniformed services.
- Plan Sponsors: U.S. federal government.
- Investment Options:
- G Fund: Government securities.
- F Fund: Fixed income index fund.
- C Fund: Large-cap stock index fund (similar to S&P 500).
- S Fund: Small-cap stock index fund.
- I Fund: International stock index fund.
- Lifecycle (L) Funds: Target-date funds.
- Employer Contributions:
- FERS employees: Automatic 1% + match up to 5%.
- Uniformed services: No match.
- Tax Advantages:
- Traditional: Pre-tax contributions, tax-deferred growth.
- Roth: After-tax contributions, tax-free withdrawals.
- Withdrawals:
- Early withdrawals subject to penalties before age 59½.
- Flexible retirement withdrawal options (e.g., annuities, partial payments).
- Unique Features: Extremely low administrative fees compared to other plans.
457(b) Plan
- Purpose: Deferred compensation plan for government employees and some nonprofit organizations.
- Eligibility: For state/local government employees and select nonprofit workers.
- Plan Sponsors: State/local governments, tax-exempt organizations.
- Investment Options: Varies by plan but generally includes mutual funds and annuities.
- Employer Contributions: Allowed, but uncommon; no coordination with 403(b) or 401(k) contributions for government plans.
- Tax Advantages: Contributions reduce taxable income; growth is tax-deferred.
- Withdrawals: No early withdrawal penalty for distributions, but income tax applies.
- Unique Features:
- No early withdrawal penalties for eligible withdrawals before age 59½.
- Typically used alongside other plans like 403(b) for higher savings.
Final thoughts
Understanding how 403(b), 457(b), and TSP contributions impact solo 401(k) limits is crucial. Contributions to 403(b) and TSP plans share the same annual employee deferral limit. However, 457(b) contributions are separate, allowing additional deferrals without affecting 401(k) limits.
Employees can maximize retirement savings by leveraging separate limits for 457(b) plans alongside solo 401(k) contributions. TSP and 403(b) deferrals reduce the total amount available for solo 401(k) employee contributions. Combining these strategies requires careful planning to stay within IRS annual contribution caps.
Efficient use of these plans ensures optimized tax benefits and higher retirement savings potential. Solo 401(k) contributions can still include employer contributions, increasing overall savings. Always consult a financial advisor to navigate these complex contribution rules effectively.
