What is a 457 Plan?
The 457 plan, also referred to as a deferred compensation plan, is a retirement plan established by a state or local government, a nongovernmental unit of a tax-exempt organization, or a tax-exempt non-church entity for its employees. This does not include plans such as qualified plans, 403(b) plans, 403(a) plans, and IRAs maintained by those organizations, as those are not considered 457 plans.
Eligible 457 plans are referred to as 457(b) plans and ineligible 457 plans are referred to as 457(f) plans.
Eligible 457 plans, which are Governmental 457 plans or 457(b) plans, can be rolled over to an IRA, qualified plans, or 403(b) plan
Ineligible 457 plans cannot be rolled over to an IRA, qualified plans, or 403(b) plan
An organization must be a state or local government or a tax-exempt organization under IRC 501(c) in order to be eligible to establish a 457(b) plan.
Employers or employees through salary reductions contribute up to the IRC 402(g) limit (see chart below) on behalf of participants under the 457(b) plan.
Contributions to a 457(b) plan are tax-deferred.
Earnings on contributions to a 457(b) plans are tax-deferred
Additional Helpful Information Related to the 457 Plan
Employers may choose to make Matching Contributions to the accounts of employees who make salary deferral contributions. However, the aggregate contributions to a participant’s account cannot exceed the limits indicated in the chart above.
Contributions to 457(b) plans are tax-deferred
Contributions to 457(f) plans are not tax-deferred, unless there is a substantial risk of forfeiture