Section 457 Deferred Compensation Plan

A deferred compensation plan is another name for a 457 b retirement plan or 457 plan for short.

Section 457 deferred compensation plan. 401 k plans are offered by private employers while 457 plans are offered by state and local governments and some. Excess deferrals made to an eligible deferred compensation plan may result in the loss of the plan s eligible status under irc section 457 b unless they re timely corrected. The employer provides the plan and the employee defers compensation into it on a pre tax or after tax roth basis.

401 k plans and 457 plans are both tax advantaged retirement savings plans. Saving to your 457 plan can help you maintain your desired standard of living. The limit was 19 000 in 2019.

You can contribute up to 19 500 as an elective deferral to your employer s 457 b plan in 2020. Deferred compensation plans are designed for state and municipal workers as well as employees of some tax exempt organizations. Generally speaking 457 plans are non qualified tax advantaged deferred compensation retirement plans offered by state governments local governments and some nonprofit employers.

The maximum amount a person can contribute to a section 457 deferred compensation plan is set each year by the irs after taking inflation into account. While a pension and or social security may go a long way they are unlikely to be enough. The 457 plan is a type of nonqualified tax advantaged deferred compensation retirement plan that is available for governmental and certain nongovernmental employers in the united states.

The content on this page focuses only on governmental 457 b retirement plans. The requirements for timely correction of deferrals are different for an eligible 457 b plan maintained by a non governmental tax exempt organization tax exempt 457 b plan and a 457 b plan maintained by a. A 457 plan is designed to supplement your retirement income.

While a pension and or social security may go a long way they may not be enough.