What Is A Section 457 Plan

Generally speaking 457 plans are non qualified tax advantaged deferred compensation retirement plans offered by state governments local governments and some nonprofit employers.

What is a section 457 plan. Plans of deferred compensation described in irc section 457 are available for certain state and local governments and non governmental entities tax exempt under irc section 501. A 457 plan is a kind of defined contribution retirement plan available to state and local public employees but can also be offered by certain nonprofit organizations. 457 b and 457 f.

A governmental unit a state or political subdivision of a state or an agency or instrumentality of one of these or. For the most part the plan operates similarly to a 401 k or 403 b plan with which most people in the us are familiar. With this type of plan you can contribute pre tax dollars from your paycheck and that money won t be taxed until you withdraw the money usually for retirement.

There are two types of 457 plans. Saving to your 457 plan can help you maintain your desired standard of living. The employer provides the plan and the employee defers compensation into it on a pre tax or after tax roth basis.

While a pension and or social security may go a long way they are unlikely to be enough. Less common are 457 f plans which are offered to top level employees and some non government employees. You contribute to a 457 plan via deductions from your paycheck just like with a 401 k or 403 b.

For 2015 the 457 contribution limit is 18 000 which is considerably more than the maximum of. An entity exempt from income tax under irc section 501 c a non governmental sponsor. Except as provided in subparagraph b the application of section 457 of the internal revenue code of 1986 by reason of the amendments made by this section to deferred compensation plans established and maintained by organizations exempt from tax shall apply to taxable years beginning after december 31 1986.

A 457 b plan is an employer sponsored tax favored retirement savings account. A 457 plan is designed to supplement your retirement income. A 457 b plan is usually available to local and state government workers and those employed by tax exempt organizations.