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457 Deferred Compensation Plans

A 457 Deferred Compensation Plan is a supplemental retirement savings program that allows you to make contributions on a pre-tax basis. Federal, and in most cases, state income taxes are deferred until your assets are withdrawn, usually during retirement when you may be in a lower tax bracket.

What are the benefits of participating in a 457 plan?

  • You reduce your current income taxes while investing for retirement.
  • Your earnings accumulate tax-deferred.
  • You can dollar cost average through convenient payroll deductions. *
  • You may be allowed to make additional "catch-up" contributions if you are 50 (or older) or within three years of your normal retirement age and already contributing the maximum to your plan.
  • If you change jobs, you have the flexibility to move your account into your new Employer's retirement plan.
  • If you retire or leave service early, there are generally no penalties for withdrawals.
  • Supplemental investments are helpful in states and communities where no contribution is made to Social Security.

* Dollar cost averaging does not assure profit or protect against loss in a declining market. Since dollar cost averaging involves continuous investing, regardless of fluctuating prices, investors must consider their level of comfort in continuing to invest during a declining market.

The ICMA-RC 457 Plan Advantage

  • You can increase, decrease, stop and restart contributions as often as you wish without fees or penalties (subject to your Employer's approval).
  • You may choose from a wide range of investment options selected by your employer for the plan.
  • There are no minimum investment requirements.
  • Your designated beneficiaries are entitled to receive all remaining funds in your account in the event of your death.
  • You have the most flexible withdrawal payment options available under law.
  • You control your account even while you are withdrawing assets.

Please contact your employer for information about enrolling in your 457 Deferred Compensation Plan. To access the standard ICMA-RC 457 plan forms visit our Forms Center.

Keep in Mind:

  • There are strict Internal Revenue Code limits on the amount you may contribute each year.
  • There are two "Catch-Up" provisions that allow you to contribute over-and- above the normal annual contribution amount.
  • If you retire or leave service early, there are no penalties for withdrawals. However, you will be subject to taxes on the amount that you withdraw.
  • You are required under IRS rules to begin withdrawing from the plan in the year you reach age 70½ or, if still working for the employer, in the year you retire, whichever occurs later.