457b Deferred Compensation for Government Employees

For government employees, a 457b plan is a popular option for saving for retirement.

The 457b plan is a deferred compensation plan that allows employees to contribute a portion of their salary to a retirement account before taxes are taken out.

Contributions to a 457b plan are made with pre-tax dollars, which reduces the employee's taxable income.

This plan is particularly beneficial for government employees who may not have access to a 401(k) or other employer-sponsored retirement plans.

A 457 plan is a tax-deferred retirement savings plan that allows employees to contribute pre-tax dollars, reducing their income.

Contributions are made to an account in the employee's name for their exclusive benefit and can be rolled into other retirement accounts, such as IRAs and 401(k)s, in the future.

Employees can expect to pay taxes on withdrawals, typically at retirement, after the funds have had several years to grow.

Funds are withdrawn from an employee's income without being taxed, providing a potential long-term benefit for retirement savings.

A governmental 457(b) plan is sponsored by a government entity, which is a key distinction from other types of plans.

These plans offer a unique benefit in that your contributions are held in a trust and can't be claimed by your employer's creditors.

This protection is similar to what you'd find with 401(k)s, which is reassuring for those who value financial security.

Governmental 457(b) plans also allow you to roll over your savings into other retirement accounts, such as IRAs and 401(k)s, providing flexibility in your retirement planning.

This means you can consolidate your retirement funds and make the most of your savings.

A 457 plan is a type of tax-deferred retirement savings plan.

Contributions are made to an account in the employee's name for the exclusive benefit of the employee and their beneficiaries.

The value of the account is based on the contributions made and the investment performance over time.

Funds are withdrawn from an employee's income without being taxed and are only taxed upon withdrawal, which is typically at retirement, after the funds have had several years to grow.

Employees make contributions as part of their paycheck and, if the employer offers a company match, the employer will make contributions as well.

There are two types of 457(b)s, each with different rules, but we're focusing on the 457(b) plans in this article.

A 457(b) deferred compensation plan is a type of tax-advantaged retirement savings account that certain state and local governments and tax-exempt organizations offer employees.

Pre-tax contributions to a 457(b) plan reduce the employee's taxable income for the year.

These contributions are not subject to tax until withdrawal. Employees can make after-tax Roth contributions, which allow for potentially tax-free withdrawals.

457(b) plans can supplement your pension and provide extra income to enjoy the kind of retirement you want and deserve.

Pensions and 457(b) plans work together to help cover basic retirement expenses like housing and healthcare.

You have control over how your 457(b) plan investments are made, choosing from options offered by your employer's plan.

A typical plan includes a wide range of options, from conservative stable value funds to aggressive stock funds, allowing you to build a diversified portfolio or select a simple target-date or target-risk fund.

You are solely responsible for choosing the investment options for your account, and can refer to the Comparison of Investment Options to make informed choices.

The County, as Plan Administrator, monitors the investment options and will delete or remove funds that fail to perform according to their guidelines, and any money invested in a removed or replaced fund will be mapped to another option.

Mutual funds and annuity products, including fixed annuities, equity-indexed annuities, and variable annuities, may be offered in your specific plan.

You always have the ability to change the way an investment is mapped by directing your balance to another option offered under the plan.

The benefits and advantages of a 457(b) plan are numerous. Contributions are made on a pre-tax basis, reducing taxable income and growing tax-deferred until withdrawal.

For employees, the catch-up options are a significant advantage. Employees over age 50 can contribute on top of the limit for the year, allowing them to increase their savings.

The Pre-Retirement Catch-Up Provision also gives participants aged 60, 61, 62, and 63 the opportunity to contribute an additional amount on top of the normal contribution limit.

A 457(b) plan offers significant benefits for employees and employers alike. Employees can contribute to their 457(b) plan on a pre-tax basis, reducing their taxable income.

This tax-deferred savings can add up over time, allowing employees to grow their retirement savings more efficiently. Contributions are made before taxes, so you won't pay taxes on the money until you withdraw it.

Employees over 50 can contribute even more to their 457(b) plan, taking advantage of catch-up options. This can help bridge the gap in retirement savings, especially for those who didn't contribute as much earlier in their careers.

For employees aged 60, 61, 62, and 63, there's an additional catch-up provision that allows them to contribute even more to their plan. This can be a game-changer for those nearing retirement.

Designating beneficiaries for your 457(b) account is also crucial. By doing so, you can ensure that your assets are distributed according to your wishes after you pass away.

Equitable has been a top choice for many public service employees across the country.

We've designed our 457(b) plan to meet the specific needs of public service professionals.

This tailored approach has earned the trust of public sector employees over time.

For over 165 years, Equitable has offered plans that fit the unique needs of public sector employees.

This long history of service shows a commitment to understanding and meeting the needs of public service employees.

Equitable's plans are designed to make retirement better for public service employees, who work hard to make their communities better every day.

Withdrawals from a 457(b) plan are generally taxable, but you won't face a 10% penalty tax if you take distributions before age 59½.

You'll need to pay federal and state taxes on the amount withdrawn, which can increase your tax liability significantly if you don't plan correctly.

Unlike other retirement accounts, 457(b) plans don't have a penalty for withdrawals made before age 59 ½.

You can postpone paying income taxes on your contributions and earnings until you receive them, usually at retirement when you're in a lower tax bracket.

Required minimum distributions (RMDs) apply to 457(b) retirement accounts, starting when you reach 73 and are no longer working for that employer.

Here's a summary of when RMDs start:

You can also take penalty-free withdrawals at retirement (if age 59 ½) or after you reach age 70 1⁄2 or separate from service, whichever is later.

You can make withdrawals from your 457(b) account when you leave employment, and you have the option to take payments as needed or schedule automatic payments. You maintain control over your investments and can continue to benefit from tax deferral even after you leave your employer.

Withdrawals are generally taxable, but you won't face a 10% penalty tax on distributions prior to age 59½. However, required minimum distribution (RMD) rules apply to 457(b) retirement accounts, and you must begin taking RMDs by April 1 of the year following the year you turn 73.

You can request a withdrawal from your 457(b) account by logging in to your account to see if your employer allows online withdrawals, or by completing and submitting the forms in the 457(b) Plan Benefit Withdrawal Packet. To obtain a copy of the packet, contact MissionSquare Plan Services.

There are specific circumstances under which you can withdraw money from your 457(b) account before retirement age, including unforeseen emergency withdrawals and loans. Unforeseen emergency withdrawals are permitted if you're under severe financial distress, but the IRS definition of what qualifies as an unforeseen emergency is very specific and more stringent than the definition of hardship under the 403(b) plan.

You can take a loan against your 457(b) account balance, subject to certain restrictions and the participant should make themselves thoroughly familiar with the loan provisions in the 457(b) Plan document before requesting a loan. The IRS limits loans to the lesser of $50,000 or one half of your account value.

Here are some key points to keep in mind:

It's not too early to start thinking about retirement, and a small amount invested now can make a big difference tomorrow.

Investing in a 457b plan can help you build a nest egg for the future, and it's a great way to start saving early.

A small amount invested regularly can add up over time, making it easier to achieve your retirement goals.

You've worked hard to save for your retirement, and now it's time to think about what happens next. As you approach your retirement age, you'll need to decide what to do with your 457(b) plan.

You can transfer your assets to a new employer's plan if they allow it. This is a great option if you're staying with the same company, but be sure to check their plan details first.

If you're changing jobs or retiring, you can move your assets to a rollover IRA at an institution of your choice. This will keep the money growing tax-deferred.

You can also leave the money in your current plan, which will continue to grow tax-deferred. However, if your account has less than $5,000, you may be required to transfer the assets, so check with your employer for details.

If you're 70½ or older, you'll need to take required minimum distributions (RMDs) from your 457(b) plan. The age at which you need to start taking RMDs depends on your birthdate: 70½ if you were born before July 1, 1949, 72 if you were born after June 30, 1949, and before January 1, 1951, or 73 if you were born after December 31, 1950.

You have a few options for taking your 457(b) money if you leave your employer. Here are the details:

Divorce can have a significant impact on your retirement plans, and it's essential to understand how your retirement accounts will be affected.

If you're going through a divorce, some or all of the balance in your 457(b) account may be transferred.

A QDRO, or qualified domestic relations order, is required to transfer your 457(b) account balance. A QDRO is a decree, judgment, or order that meets the qualification requirements of the Internal Revenue Code.

To be considered a QDRO, the document must meet specific requirements. Here are the key points:

You should work closely with your attorney to ensure that the distribution of your 457(b) assets and all other retirement plan assets meet the requirements of a QDRO.

Death can be a difficult topic to think about, but it's essential to consider what happens to your retirement savings after you pass away.

Your 457(b) plan will pay out death benefits to a beneficiary or beneficiaries listed with your vendor.

You should review your beneficiary designations annually and update them as necessary through your 457(b) vendor.