What is an IRS 457 plan?
Section 457 plans are nonqualified, unfunded deferred compensation plans established by state and local government and tax-exempt employers. An attendant feature of section 457 plans is that they may provide less security to participants than do qualified plans.
What is the difference between an IRA and a 457 plan?
As mentioned, contributions to 457 plans are made with pre-tax dollars. But you will pay taxes on any money you withdraw during retirement. With a Roth IRA, you do not get an upfront tax break, but your contributions and earnings grow tax-free and are withdrawn tax-free in retirement.
How is 457 taxed?
Employer contributions to 457(f) plans are includible in income in the year they are no longer subject to any substantial risk of forfeiture. They are subject to income tax withholding in the year they are actually or constructively paid.
When can I withdraw from 457?
59½
Unlike other retirement plans, under the IRC, 457 participants can withdraw funds before the age of 59½ as long as you either leave your employer or have a qualifying hardship. You can take money out of your 457 plan without penalty at any age, although you will have to pay income taxes on any money you withdraw.
Is a 457 plan the same as a 401k?
401(k) plans and 457 plans are both tax-advantaged retirement savings plans. The two plans are very similar, but because 457 plans are not governed by ERISA, some aspects, such as catch-up contributions, early withdrawals, and hardship distributions, are handled differently.
Does 457 reduce taxable income?
It is also offered by some tax-exempt organizations. Your contributions to a 457 b plan are deducted from your paycheck. With a traditional 457 b, your contribution is deducted from your taxable income, reducing your taxes for the year in which you contributed.
Do I have to pay taxes on my 457?
A 457 plan is one of several retirement plans that employers offer to their workers, but it is less common and more complex than a 401(k) or 403(b). You can withdraw your money from 457 before age 59½ without a 10% penalty, unlike a 401(k), but you will owe taxes on any withdrawal.
Is a 457 the same as an IRA account?
The contribution limits for 457 plans and IRAs are separate, so if you’re eligible to contribute to both a 457 plan and an IRA, then you can have both types of plans. It is possible to have both an IRA and a 457 plan. You will be required to observe contribution limits for both plans, however.
Is a 457 tax deductible?
Your 457(b) Savings Plan contributions will be automatically deducted from your gross pay before any federal — and in most cases, state and local — income taxes are deducted. This reduces your taxable income, which means you pay less income tax each year.
Is 457 exempt from FICA?
Note the limit on employer contributions is far less in the 457(b) plan than the amount that the employer could contribute in a 403(b) plan AND FICA taxes must be paid on employer 457(b) contributions, whereas employer 403(b) contributions are exempt from FICA taxation.
Can you roll over an IRA into 457?
You may rollover proceeds from an IRA to a governmental 457(b) plan as long as the IRA contains only money previously contributed through a qualified plan (i.e. 401(k);403(b) or other governmental 457(b)). In other words, the IRA must be a rollover IRA containing a distribution from another qualified plan.