Can I Contribute to Both a 401(k) and a 457 Plan?

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Back in 2005, a reader emailed me with a fascinating tax question. The reader wanted to know if an employee can contribute both to a section 457 retirement savings plan and to a section 401(k) plan. 

"In addition to deferring $14,000 in 2005 in a 457 plan, can you also defer in other plans like a 401k (if I understand correctly)? Can you point me to supporting IRS or other documents? I have a 401k and a 457b plan. My combined deferrals in 2005 exceed $14,000. My TaxCut program appears to assume you can only defer $14,000 for all plans. I'd like supporting documentation if I override the program. Thank you for your help." -- D. Duncan.

The answer is yes. You certainly can contribute both to a Section 457 retirement plan as well as a 401(k) plan. And the answer is not limited just to the year 2005. The answer is still true for tax year 2017.

The reason is that each plan has separate limitations on the amount of money an employee can contribute. Back in 2005, I asked IRS spokesperson Jesse Weller about this situation, and here's what he told me,

"For 2005, annual deferrals under a 401(k) plan are limited to $14,000 under IRC section 402(g), and annual deferrals under a 457 plan are also limited to $14,000 under section 457(b). The amounts deferred under the 401(k) plan are identified with the letter "D" in box 12 on Form W-2. The amounts deferred under the 457 plan are identified with the letter "G" in box 12 on Form W-2.​

"Since each plan has independent limits, it is possible to have total deferrals of $28,000 for 2005."

Many large government employers offer their employees both 401(k) and 457 plans, which enables employees to contribute to both plans, and thus have an opportunity to supercharge their retirement savings.

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