Save time with our cheat sheets, fact sheets, checklists & books!

February 17, 2009

Get to know your 457 Plan: Rollover, Eligibility and Withdrawal Options

Your Guide

Share on print
Print
Share on facebook
Share on twitter
Share on pinterest
Share on linkedin

457 Plan

The 457 plan, also referred to as a deferred compensation plan, is a retirement plan established by a state or local government or tax-exempt organization.
federal building for 457 plan roll over

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

  • Individuals may defer up to 100% of their compensation up to the dollar limit that is in effect for the year. Individuals who reach age 50 by the end of the year may defer additional amounts referred to as ‘Catch-up’ contributions.
  • The dollar limits are available here
  • 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

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on print
More

Keep Learning

Excess deferral

Definition Salary deferral contributions, contributions are limited to the lesser of the IRC § 402(g) limit or 100% of compensation. Salary deferral contributions in excess

Deduction

Definition A deduction is a Tax write-off which is allowed for contributions to traditional IRAs or employer sponsored plans. Individuals who are active participants are

Annual Addition Limit

Definition The annual Addition limit is the maximum amount that may be added to a defined contribution plan on behalf of a participant for any

Individual Retirement Arrangement (IRA)

Definition Individual retirement arrangement (IRA) is an umbrella term that covers individual retirement account and individual retirement annuity. These are retirement savings vehicles established by

Be among the first to know when

IRA Rules
Change