415(c) Limit

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on January 22, 2024

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Definition of 415(c) Limit

The 415(c) limit refers to the maximum amount of contributions that can be made to a defined contribution retirement plan in a calendar year.

This limit is established under Section 415(c) of the Internal Revenue Code (IRC) and is intended to prevent excessive retirement savings and ensure equitable tax treatment.

The main purpose of the 415(c) limit is to regulate the amount of money that individuals can contribute to their retirement plans, preventing excessive savings and ensuring that everyone has an equitable opportunity to benefit from tax-advantaged retirement savings.

Background and History of the 415(c) Limit

Legislative Origins

The 415(c) limit was initially established under the Employee Retirement Income Security Act (ERISA) of 1974, which created the Internal Revenue Code Section 415.

Over the years, the limit has been adjusted for inflation and modified through various amendments to better align with changing economic conditions and policy goals.

Rationale for Implementing the 415(c) Limit

The primary reasons for implementing the 415(c) limit are to prevent individuals from accumulating excessive retirement savings in tax-advantaged plans and to ensure equitable tax treatment for all taxpayers.

By limiting the amount of contributions, the government aims to balance the need for individuals to save for retirement while maintaining a fair tax system.

Key Components of the 415(c) Limit

Key Components of the 415(c) Limit

Contribution Limits

Annual Limitations

The 415(c) limit is subject to annual adjustments based on changes in the cost of living. As of 2024, the annual limit for contributions to a defined contribution plan is $69,000. This limit may be increased in future years to account for inflation.

Factors Affecting Contribution Limits

Several factors can affect the 415(c) limit, including the type of retirement plan, the participant's age, and the specific plan provisions. In some cases, exceptions or special rules may apply, allowing for higher contribution limits.

Types of Plans Affected

Defined Contribution Plans

The 415(c) limit primarily affects defined contribution plans, such as 401(k) plans, profit-sharing plans, and money purchase pension plans.

These plans allow employees to contribute a portion of their income to a tax-advantaged retirement account, with contributions and investment earnings growing tax-deferred until withdrawal.

403(b) Plans

The 415(c) limit also applies to 403(b) plans, which are similar to 401(k) plans but are designed for employees of public schools, non-profit organizations, and certain churches.

457 Plans

In addition to the above, the 415(c) limit affects 457 plans, which are non-qualified deferred compensation plans offered by state and local governments and certain non-governmental entities.

Exceptions and Special Rules

Catch-Up Contributions

Participants aged 50 or older may be eligible to make catch-up contributions in addition to the standard 415(c) limit. These contributions allow older workers to save more for retirement, recognizing that they may have fewer years to accumulate savings.

Age-Based Adjustments

In some cases, the 415(c) limit may be adjusted based on the participant's age. For example, in 403(b) plans, participants with at least 15 years of service may be eligible for a higher contribution limit.

Aggregation of Plans

In certain circumstances, the 415(c) limit may require the aggregation of contributions across multiple plans, such as when an individual participates in both a 403(b) and a 457 plan.

Impact of the 415(c) Limit on Retirement Savings

Effect on Individual Retirement Planning

Balancing Savings and Limitations

The 415(c) limit plays an important role in helping individuals balance their retirement savings with the constraints imposed by tax regulations. By understanding and adhering to these limits, individuals can optimize their retirement savings strategy while staying compliant with the law.

Adjusting Contribution Strategies

To make the most of the 415(c) limit, individuals may need to adjust their contribution strategies, such as by increasing contributions to non-tax-advantaged accounts, seeking professional advice, or reassessing their investment mix.

Effect on Employers and Plan Sponsors

Compliance and Reporting Requirements

Employers and plan sponsors are responsible for ensuring compliance with the 415(c) limit and associated reporting requirements. Failure to adhere to these limits can result in penalties and tax consequences for both the employer and the employee.

Designing Retirement Plans Within Limits

The 415(c) limit also influences how employers and plan sponsors design their retirement plans. By understanding and working within these limits, employers can create retirement plans that offer competitive benefits while maintaining compliance with tax laws.

Potential Issues and Controversies

Critiques of the 415(c) Limit

Limitations on Personal Savings Choices

Some critics argue that the 415(c) limit unnecessarily restricts individuals' ability to save for retirement, particularly for high-income earners who may face lower limits relative to their income.

Impact on High-Income Earners

Another critique of the 415(c) limit is its potential impact on high-income earners, who may be more likely to hit the limit and face additional tax consequences. This may lead to calls for reform or adjustments to the limit for this group.

Proposals for Reform

Changes to Contribution Limits

Various proposals have been made to reform the 415(c) limit, such as increasing the limit or indexing it to wage growth. These changes could potentially provide more flexibility for individuals to save for retirement while still maintaining a fair tax system.

Alterations to Affected Plans

Another area of potential reform involves changing the types of plans that are subject to the 415(c) limit or introducing new types of tax-advantaged plans that may offer more flexibility for individuals to save for retirement.


The 415(c) limit is a regulation that sets the maximum amount of contributions that can be made to a defined contribution retirement plan in a calendar year.

Established under the Employee Retirement Income Security Act (ERISA) of 1974, the limit prevents excessive retirement savings and ensures equitable tax treatment.

The 415(c) limit is adjusted annually based on inflation and factors such as the type of plan, participant age, and plan provisions.

The limit primarily affects defined contribution plans, 403(b) plans, and 457 plans. To make the most of the 415(c) limit, individuals may need to adjust their contribution strategies.

Employers and plan sponsors must ensure compliance with the 415(c) limit and associated reporting requirements.

Some critiques of the 415(c) limit include restrictions on personal savings choices and its impact on high-income earners. Proposals for reform include changes to contribution limits or affected plans.

415(c) Limit FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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