Sponsored by state and local government employers, 457(b) Plans help employees build retirement savings and reduce taxes.
Employers such as state and local governments (including counties, cities, municipalities, villages and townships) may adopt governmental 457 Plans. Other government employers such as transit authorities, public utilities, public schools and universities may also establish a 457(b) Plan for their employees. Certain private-sector, tax-exempt employers and executives and government officials may be eligible for a 457 Plan, which differs from the 457(b) Plan discussed above.
Because of recent legislative changes, 457(b) Plans are more attractive than ever. They provide for pretax salary deferrals and tax-deferred growth on these deferrals until withdrawal, at which time they are taxed at ordinary income rates.
Employee Salary Deferral Contributions
|Age 50 or older
Salary deferrals cannot exceed 100 percent of an eligible plan participant's annual compensation.
Eligible plan participants attaining age 50 by Dec. 31 of the calendar year may make additional catch-up contributions up to $5,500*.
To receive a distribution from a 457(b) Plan, employees must reach the age of 70½ during the current calendar year or have a triggering event such as death, severance from employment (including retirement) or an unforeseen emergency.
Unlike 401(k) Plans, distributions from 457(b) Plans are not subject to the 10 percent premature distribution tax when distribution is made before age 59½.