Non Governmental 457 Plan Eligibility and Benefits

You're considering a Non Governmental 457 Plan, which is a great idea. Anyone who works for a tax-exempt organization, such as a charity or a non-profit, may be eligible for this type of plan.

Eligibility for a Non Governmental 457 Plan is typically determined by the organization you work for. To be eligible, you must be an employee of a tax-exempt organization, and the plan must be available to you through your employer.

One of the benefits of a Non Governmental 457 Plan is that it allows you to contribute to a retirement savings plan with pre-tax dollars, which can help reduce your taxable income.

Eligibility is determined each calendar year based on the earnings of the prior year. You are eligible to participate in the plan beginning the first of each year if you satisfy all of the requirements, which include having a final total eligible earnings of at least $269,000 by Dec. 31, 2024.

To be eligible, you also need to attest that you are an "accredited investor" by meeting the criteria set forth in the USC 457(b) Salary Deferral Agreement.

A 457(b) retirement plan works similarly to other types of employer-sponsored benefit plans, allowing eligible employees to elect to automatically deduct money from their paychecks on a pre-tax basis.

To be eligible for the USC 457(b) Plan, you must meet certain requirements. Your final 2024 total eligible earnings must equal or be greater than the plan's annual dollar threshold, which is $269,000 by Dec. 31, 2024.

You'll also need to attest that you're an "accredited investor" by meeting the criteria set forth in the USC 457(b) Salary Deferral Agreement. This is a straightforward process, but it's essential to ensure you qualify for the plan.

Here are the two key requirements for eligibility in a concise list:

A 457 plan is a type of employer-sponsored benefit plan that allows eligible employees to save for retirement on a pre-tax basis.

Contributions to a 457 plan are made through payroll deductions, which means the money is deducted from your paycheck before taxes are taken out. This can help reduce your taxable income.

457 plans are available for government employees and certain nonprofit employees. They're often offered as an additional retirement savings option, in addition to other plans like 403(b) or 401(k).

Eligible employees can contribute up to $23,500 in taxable compensation to a 457 plan in 2025. This is a significant amount of money that can add up over time.

One key difference between a 457 plan and a 401(k) plan is that employer matching is not typically offered in a 457 plan. This means you won't receive any additional contributions from your employer.

Here are some key benefits of a 457 plan:

The university is responsible for performing the duties required for operation of the 457(b) plan, which includes interpreting and construing the plan and determining eligibility and benefits.

As the plan administrator, the university retains the sole right to make decisions on plan matters, including eligibility and benefits. This means that if you have a question about your plan, the university's administrators will be the ones to answer it.

The university also has the right to amend the plan in any respect at any time, and to terminate the plan if needed. If the plan is terminated, all accounts will be distributed as soon as administratively possible in accordance with applicable IRS rules.

As the plan administrator, the university has a significant role in the operation of the 457(b) plan. The university retains the sole right to interpret and construe the plan and determine all questions pertaining to eligibility and benefits.

The university can amend the plan at any time and in any respect, so it's essential to stay informed about any changes. If the university decides to terminate the plan, all accounts will be distributed as soon as possible according to IRS rules.

To qualify as a 457(b) plan, it must be limited to a select group of management or highly compensated employees. This means the plan should only benefit a small percentage of the employee population.

To determine if a group meets this requirement, consider the following factors:

These factors can help determine if a group meets the criteria for a select group of management or highly compensated employees.

Filing and reporting requirements can be a bit of a challenge for plan administrators.

IRC Section 457 plans aren't required to file Form 5500, because they aren't subject to Title I of ERISA.

Non-governmental 457(b) plans, also known as Top Hat plans, must file a notification of the plan's existence with the Department of Labor.

If you're a plan administrator, it's essential to understand these requirements to avoid any potential penalties or issues.

You can select investment funds from Fidelity Investments, TIAA, or Vanguard to measure the investment experience of your account. These funds can be changed at any time, subject to the investment company's regulations.

You may contribute up to 100% of your salary to your 457(b) plan, up to the IRS annual limit. For 2025, this limit is expected to rise to $23,500.

A catch-up limit of $7,500 is available for those aged 50 and older, making their maximum contribution limit $31,000 in 2025. This limit can be increased to $10,000 or 150% of the regular catch-up limit for participants ages 60 to 63.

The contribution limits for a 457(b) plan are set by the IRS, with a maximum annual limit of $22,500 (2023) or 100% of the employee's includible compensation.

You can select the investment funds that will measure your investment experience through your 457(b) plan account by choosing from one of three provided investment companies: Fidelity Investments, TIAA, or Vanguard.

You can change your investment allocation at any time, but be aware that you'll need to contact the investment company directly to do so, as their regulations may apply.

Catch-up contributions allow you to save more for retirement, especially in the years leading up to your normal retirement age.

For those aged 50 and older, the catch-up limit is $7,500 in 2025, which can be added to your regular contribution limit, making your maximum contribution limit $31,000 ($23,500 + $7,500).

You can also make higher catch-up contributions if you're within three years of your normal retirement age, but the specifics depend on your plan.

Some 457 plans offer optional higher catch-up contributions for participants ages 60 to 63, with a maximum catch-up limit of the greater of $10,000 or 150% of the regular catch-up limit.

You can also use a plan's "double limit" provision to contribute up to twice the annual limit for three years before your normal retirement age.

Here are the catch-up contribution options:

You can withdraw from a 457(b) account without penalty for an "unforeseeable emergency." This is a one-time exception, and you'll need to prove that the emergency was truly unforeseen.

The plan offers four distribution options: a single lump-sum payment, an annuity for your lifetime, an annuity for a fixed period, and a direct transfer to a new employer's 457(b) plan. You can choose one of these options when you terminate employment.

You'll automatically receive a lump-sum payment if you don't choose a distribution option within 60 days of termination. This payment will be taxed as ordinary income.

You can also choose to receive annuity payments for a fixed period, which can range from one year to 20 years. This option can provide a steady income stream.

If you're a retiree, you'll need to take the required minimum distribution (RMD) each year once you reach a certain age. The RMD is determined by the IRS and is based on your account balance.

Here are the distribution options in a nutshell: