Press Release Articles

It can be a challenge to stay informed about all the intricacies employer retirement plans. Many are familiar with 401k plans and 403b plans, but most are unfamiliar with 457 plans. Just exactly what is a 457 retirement plan? Here is some helpful information to guide you in answering that question.

If you are familiar with 401k or 403b plans, it isn’t too hard to understand the concept of the 457 plan. The main difference between these plans is that 401k plans are for employees of private companies, 403b plans are for non-profit and public education employees, and 457 plans are for state, city, and other governmental employees. There are some other differences, so if you are enrolling in a 457 plan, do not assume it will have the same restrictions or benefits as your previous plans.

Like 403b and 401k plans, 457 plans allow employees the chance to defer taxation on pre-tax contributions they make to their retirement savings. It is is a deferred compensation plan through which employees put aside some of their income to in a tax-deferred retirement account. This means that employees can save money without paying income tax on it, or on its earnings, until retirement.

There are several notable differences between 457 plans and other plans. In 457 plans there is no minimum retirement age and therefore no early withdrawal penalty as there is with 401k plans. Also, independent contractors can be allowed to participate in 457 plans, while they cannot in 401k and 403b plans. Further, 457 plan participants cannot contribute to Roth IRA accounts as participants in the other plans can. Still, 457 plans can generally be rolled over into IRA accounts just as with 401k and 403b plans.

If an employer offers both a 457 plan and either a 401k or a 403b plan, an employee may contribute to both. Legislation passed 2001 amended the rules governing contribution limits, allowing employees to make mandated maximum contributions to both plans. The law also provides methods by which 457 participants who are fifty years old or older can “catch up” with contribution limits. On the other hand, employers do not make contributions to 457 plans as they do with 401k or 403b plans.

Non-governmental organizations can participate in some forms of 457 plans. Non-governmental 457b plans are available for employees earning at or above designated salary thresholds set by the employer. These plans allow executives, directors, and other highly paid employees to defer state and federal income tax on contributions they make during their peak earning years. Such plans are not allowed to be rolled over into IRA plans.

457f plans allow some non-governmental organizations to supplement retirement income for their employees. There are no contribution limits with these plans, though the contributions remain the employer’s property until retirement. Tax-deferment on these plans only lasts as long as employees face a “substantial risk of forfeiture”, which means the money is available to any of the employer’s creditors and the employee has vesting requirements to be eligible for distributions.

There are a lot of complex regulations about retirement accounts. Whatever plan your employer might offer, it is important to seek out qualified advice when planning your contributions and plan participation. But you be much better equipped to make solid choices for yourself if you know just what is a 457 retirement plan.

Learn what the different 457 retirement plan, 457 a, 403b, 403 b retirement are by looking online. There you will discover all you need to know about 457, 457 plans, plan 457 plans too.