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IRC 457(b) Deferred Compensation Plans

Plans of deferred compensation described in IRC section 457 are available for certain state and local governments and non-governmental entities tax exempt under IRC Section 501. They can be either eligible plans under IRC 457(b) or ineligible plans under IRC 457(f). Plans eligible under 457(b) allow employees of sponsoring organizations to defer income taxation on retirement savings into future years. Ineligible plans may trigger different tax treatment under IRC 457(f).


Who can establish a 457(b) plan?
 

The organization must be a state or local government or a tax-exempt organization under IRC 501(c).

 

How do 457(b) plans work?
 

Employers or employees through salary reductions contribute up to the IRC 402(g) limit ($18,000 in 2015, 2016 and 2017) on behalf of participants under the plan.
See 457(b) plan contribution limits.
 

What are the advantages of participating in a 457(b) plan?
 

There are significant tax advantages for participants in a 457(b) plan:

  • Contributions to a 457(b) plan are tax-deferred.

  • Earnings on the retirement money are tax-deferred.

Can a 457(b) plan include designated Roth accounts?
 

Yes, a governmental 457(b) plan may be amended to allow designated Roth contributions and in-plan rollovers to designated Roth accounts.

 

 

Choose a 457(b) plan

Establish a 457(b) plan

Participate in a 457(b) plan

Operate and maintain a 457(b) plan

Correct a 457(b) plan

Page Last Reviewed or Updated: 31-Oct-2016