Which of the following is true about contributions to eligible 457 plans?

Contributions to eligible 457 plans are subject to limits based on the Internal Revenue Code (IRC). This means that there are specific annual contribution limits established by the IRS that individuals must adhere to when making contributions to their 457 plans. These limits are designed to ensure that retirement savings are encouraged but also regulated to prevent excessive tax advantages.

Eligible 457 plans, which are typically offered by state and local government employers as well as some non-profit organizations, have distinct contribution limits that can change annually based on inflation adjustments. For individuals close to retirement, there are often catch-up contribution provisions available, allowing them to contribute additional amounts beyond the standard limit to boost their retirement savings.

Understanding these limits is crucial for effective retirement planning, as they inform employees how much they can legally contribute to their plans each year while still receiving tax benefits.