457(b) Plans

457(B) Retirement PlansA 457(b) plan is a non-qualified deferred compensation plan available to certain government employees (including state and local workers, police officers, firefighters, and some teachers), as well as highly compensated employees of non-profit organizations.

Because 457(b) plans are not governed by the same laws and regulations as 401(k) plans and 403(b) plans, they are considered “non-qualified” and offer greater flexibility.

Much like a 401(k) or 403(b) plan, employees can contribute to the plan via payroll deduction on a pre-tax basis and earnings accumulate tax-deferred until withdrawn.

Unlike 401(k) and 403(b) plans, most employers do not offer any matching contributions to 457(b) plans. However, matching contributions are possible.

Employees who have both 457(b) plans and either 401(k) plans or 403(b) plans can contribute the maximum allowable amount to both plans.

457(b) plans do not have to be offered to all employees, and can be offered to independent contractors.

Another advantage of 457(b) plans is that they have no penalty for taking money out before the employee turns 59 1/2, as long as they are retiring or ending their employment.

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