CFP

AAA

Types of Retirement Plans - 457 Plan

A 457 is a nonqualified, employer-sponsored deferred compensation plan for employees of state and local government agencies and some tax-exempt organizations. Eligible employees are allowed to make salary deferral contributions to the 457 plan. Earnings grow on a tax-deferred basis and contributions are not taxed until the assets are distributed from the plan.

  1. Eligible employers - A state, political subdivision of a state (such as a city or town), any agency or instrumentality of a state or political subdivision of a state (such as a school district), and any tax-exempt organization except for a church or synagogue or an organization controlled by a church or synagogue.
  2. Types of plans
    • Eligible -A plan that includes limits on the employee contributions to the plan. Receives favorable tax treatment.
    • Ineligible - A plan providing for greater employee deferral of compensation, generally designed for highly paid executives. Receives no favorable tax treatment.
  3. Contribution limits for eligible plans
    • Basic limit - $17,500 (2014).
    • 50-or-over catch-up contributions limit - $5,500.
    • 3-year-old catch-up provision -Applies during participant's last three years before plan's normal retirement age. Limited to lesser of:
      • $35,000 (twice basic annual limit for 2014) or;
      • The basic annual plus underutilized basic annual limit plus underutilized basic annual limit in prior years.
      • Not available to those utilizing the 50-or-over catch-up provision.
    • Double dipping - Contributions to a 457 plan do not reduce contributions to other types of deferred compensation plans such as 401(k) or 403(b) plans. This would allow an employee under age 50 to contribute $17,500 to a 403(b) and another $17,500 to a 457 plan if both are offered.
  4. Withdrawals
    • Permitted after severance from employment.
    • May permit loans and distributions for unforeseen emergencies or small, inactive accounts.
    • No penalty for withdrawal before age 59 1/2.
Keogh Plans (HR-10)
comments powered by Disqus
Related Articles
  1. Another Sound Lesson In Risk Management
    Investing News

    Another Sound Lesson In Risk Management

  2. Choosing The Right ETF Index To Reach ...
    Investing News

    Choosing The Right ETF Index To Reach ...

  3. Using Normal Distribution Formula To ...
    Investing Basics

    Using Normal Distribution Formula To ...

  4. Hypothesis Testing in Finance: Concept ...
    Active Trading Fundamentals

    Hypothesis Testing in Finance: Concept ...

  5. Top 6 Ways To Recession-Proof Your Job
    Personal Finance

    Top 6 Ways To Recession-Proof Your Job

Trading Center