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Comparison of Tax-Exempt 457(b) Plans and Governmental 457(b) Plans

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457(b) Plans: Governmental vs. Non-Governmental

457 b governmental plans vs non governmental

In a previous post , we discussed the basics of 403(b) and 457(b) retirement plans. 457(b) plans are a great way to make additional tax-deferred contributions beyond the limits of a 403(b). More importantly, withdrawals made prior to age 59.5 are not subject to the 10% early withdrawal penalty. This makes 457(b) plans an excellent option if you are planning for early retirement, but you must consider the potential risks involved.

There are two distinct types of 457(b) plans: governmental and non-governmental. For those who are employed by a state or local government (or political subdivision, instrumentality, agency), you have a governmental 457(b) plan. For those who are employed by a private 501(c) tax-exempt organization (such as private schools, nonprofit hospitals and charities), then your 457(b) plan is likely non-governmental.

Governmental 457(b) Plans

In a governmental 457(b) plan, the funds are held in a trust which is not subject to creditors of the employer. Upon separation from the employer, you can roll the funds over into an IRA or 401(k).

If you have a governmental 457(b) and a 403(b) with employer match, take full advantage of the employer match in your 403(b) first. If early retirement is your goal, you'll want to turn to the 457(b) next. The savings in your governmental 457(b) are safe from your employer’s creditors and allow for early withdrawals penalty-free. In fact, you may not want to roll the funds from your governmental 457(b) into an IRA or 401(k) until you're at least 59.5 years old so that you don’t forfeit the penalty-free early withdrawal benefit.

Non-Governmental 457(b) Plans

In a non-governmental 457(b) plan, the funds are not held in a trust. Instead, they're earmarked for future distribution to you. These assets are subject to the employer's creditors in the event of bankruptcy or litigation. Upon separation from the employer, you can't roll the funds over into an IRA or 401(k) plan. You might be able to roll them over into another non-governmental 457(b), or withdrawal may even be required. It's important to review the Summary Plan Description (SPD) to understand the specifics of each plan including withdrawal options.

If you have a non-governmental 457(b) plan, then you need to weigh the advantages of additional tax deferral and early withdrawals vs the risk of loss. Assess the following:

  • Are you currently in a high tax bracket?
  • How is your employer’s current financial strength? How do you expect its financials to be up until the point you withdraw from your plan?
  • What withdrawal options are available upon your separation? Will you be required to take a lump sum distribution (need to consider tax consequences of this)?
  • How close are you to retirement?
  • If you’re close to early retirement, what other funding options do you have?
  • Have you fully funded other more “secure” pre-tax accounts like a Health Savings Account (HSA) and 403(b)?

Once you’ve explored the benefits and risks of your non-governmental 457(b), you can make a more informed decision about whether or not to participate in it. 

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Non-governmental 457(b) rollover rules

Hospital 457(b) Plans – The Ultimate Guide!

Should you use your non-governmental 457(b) plan.

This is the ultimate guide to non-governmental 457(b) Plans. If you are a highly compensated employee of a non-profit institution and want to know if you should use your 457 plan, chances are you are in the right spot.

Many physicians and executives can access a non-governmental 457(b) plan. Also occasionally known as a Top Hat Plan , they can get confusing quickly.

First off, the following information is not for those with governmental 457 plans . If you work for the county or state government and have a governmental 457 plan, congratulations! You have another (and probably better) 403b plan. Use your 457 first, and move on!

Secondly, if you have a non-governmental 457 (f) plan—well, take plan documents home and plan to waste several hours trying to figure that puppy out. I’ll detail the differences between the 457(b) vs. 457(f) below.

Moreover, there are many more flavors of Non-Qualified Deferred-Compensation (NQDC) plans. Look closely and discover what type of plan you have. NQDC is the broad category of plan. If you have a for-profit employer, you must dig deeper into the plan documents. All 457 plans are NQDCs, but not all NQDCs are 457s.

In essence, this ultimate guide to top-hat plans is for someone who works for a non-profit institution —a 501(c)(3)—who is highly compensated and considering investing in their employer’s non-governmental 457(b) plan.

Definition and Purpose of the Non-Governmental 457 Plan

A non-governmental 457 plan is defined as an extra or bonus tax-advantaged salary deferral plan for a select group of employees. They allow you to defer your salary during peak income years but have distinct distribution options than qualified plans (401k and 403b). Since they are non-qualified, they cannot be offered to rank-and-file employees . Qualified plans cannot discriminate and must meet nondiscrimination testing.

On the other hand, Top Hat Plans must discriminate .

Why do employers offer non-governmental 457 plans?

Congress authorizes employers to offer non-governmental 457 plans with preferential tax treatment to encourage retirement savings.

Non-governmental 457(b) rollover rules

Figure 1 (Why employers offer non-governmental 457 plans)

457 plans are often pitched with a figure similar to the one above. Note the “income replacement goal” is 80% in the figure. Social security income is green, and qualified retirement benefits sit on top. As your current income increases, there is a larger and larger gap between replacement goals and your ability to put away money for retirement.

In short, if you make more money during your career, they expect you will spend more money in retirement and thus have a need to fill that “gap.”

While we can criticize in multiple ways, the idea that you should save more money if you earn more money holds.

Beyond the ability to put away more tax-deferred income, employers offer non-governmental 457 plans to retain talent and encourage loyalty.  These plans aim to keep executives and key employees happy and engaged.

Let’s move on to the basics of 457(b) plans.

Basics of the Non-Governmental 457(b) Plan

IRS Code Section 457 provides tax-deferred treatment for these non-qualified deferred compensation plans. Sometimes called NQDC plans, sometimes Top Hat Plans—it can get confusing quickly.

Quickly, here are the basics of the non-governmental 457(b):

  • Limited to a select group of employees (thus not Qualified plans which, by definition, cannot discriminate against rank and file employees)
  • The plan is unfunded, and all assets are the property of the employ er
  • Assets are available to creditors of the employer due to bankruptcy or litigation
  • Total contribution limit of $19.5k in 2020
  • CAN NOT be transferred to any other pre-tax plan (Such as IRA, 401k, etc.). This is important: you can not do a rollover on a non-governmental 457 plan to an IRA.
  • Have very different distribution options than qualified plans

There are a couple of important points above. First, you don’t pay current income taxes with a 457 because you have no  access to the deferred income . The employer cannot separately hold the assets specifically for you. They promise you a future salary but hold the assets in their general funds, not in a particular account with your name on it. The 457 plans are unfunded . Creditors and predators have the right to your assets before you do .

Those are the basics. What are the most important considerations before you defer your salary?

Most Important Consideration for a Non-Governmental 457 Plan

For most folks in their highest income-earning years, a Top Hat plan is a chance to defer paying taxes on salary until later. This can be a good idea if:

  • You are in the top two or three tax brackets
  • Or, you are getting close to retirement
  • Or, you are considering funding options for early retirement
  • AND you are fully contributing to other pre-tax accounts
  • AND there are acceptable distribution options

In summary, a non-governmental 457 is NOT the plan you fund first .

You only invest in a non-governmental 457 plan if you have your other ducks in a row AND you have a need! Your ducks include: fully funding other retirement accounts, including HSA and backdoor Roth. The need is: highest tax brackets, within 5-10 years of retirement, or considering early retirement.

In addition , there must be good distribution options, and you should have a plan for these distributions.

This is important to understand. As the money in the 457(b) is not your money , you don’t want to defer your salary to one of these top-hat plans without contemplation. There are significant downsides.

Downsides of Non-Governmental 457(b) Plans

What are the downsides to consider?

  • The deferred salary is subject to the creditors of your employer
  • These plans are unfunded, which means your employer does not have to set aside money to pay for these liabilities in the future
  • Can you roll over a non-governmental 457 plan to an IRA? No!
  • Unlike 403b plans, you pay Medicare and FICA taxes with 457 Plans
  • Distributions are reported on W-2 forms rather than 1099s
  • Most importantly, distribution options can make or break a top-hat plan

The issue with Medicare and FICA taxes is different than qualified plans. Since this is considered deferred salary , you must pay Medicare and FICA taxes if owed. In addition, when you get distributions, you are issued a W-2 by your employer rather than a 1099 as from a qualified plan.  Usually, the salary you defer is above the wage limit for social security, so you just pay the 1.9% FICA tax upon deferral.

Let’s discuss the most critical potential downside separately.

Non-Governmental 457 Distribution Options

Since these plans are Non-Qualified Deferred-Compensation (NQDC) plans, they don’t have to follow ERISA guidelines. Importantly, this means they do not have Summary Plan Descriptions.

That said, non-governmental 457 plans do need to have some documentation. Ask your Employer for a copy of the plan documents.

In the plan documents, look for the 457b distribution options . The default distribution option for a nongovernmental 457 plan is a lump sum distribution within 60-90 days of severance from the employer. Also known as separation from service, you get ALL of your deferred salary reported in a W-2 in a lump sum in one tax year. If you are not careful, this can result in a significant tax hit at higher rates than deferred.

Employers can and usually do offer other 457b  distribution options. For example, they may extend out distributions until you are 70 or start them after a different specified delay. It is important to note that the distribution decision is irrevocable ; sometimes, plans may offer you a one-time chance to change your mind.

Usually, you are forced to take distributions over 5-10 years. This is important—if you are still planning on working a highly compensated job after leaving your current employer, you will have to take the nongovernmental 457 salary on top of your current salary.

This is why waiting to fund one of these plans is essential until you are sure of your traditional or early retirement plans . It doesn’t do any good to defer income now just to take it soon while still earning income.

It can be tricky to plan for non-governmental 457 b distributions. Therefore, your 457b distribution options are the first important consideration.

Tax Planning and Nongovernmental 457 plans

Tax planning is vital for nongovernmental 457 plans since they are deferred salary.

Suppose you plan to take distributions after you are 70. The fully taxable distributions sit on top of the taxable portion of your social security, pensions, and annuities and required minimum distributions from your qualified retirement accounts. Significant tax arbitrage or tax savings are still possible if you are in the highest two or three tax brackets while you are working or near the end of your career.

For those considering early retirement, there are other considerations. People who retire early have a fantastic Tax Planning Window , and deferred salary from nongovernmental 457 plans can be a blessing or a curse. Suppose you need the income, great. Just remember you are going to pay ordinary income taxes on the distributions. Be aware this income may keep you from getting Premium ACA Tax Credits for health care insurance and limit your ability to do Roth conversions.

Knowing your distribution options, thus, is crucial to tax planning with your nongovernmental 457 plan.

Employer Bond Ratings and Nongovernmental 457(b) Plans

Also, it is essential to check your employer’s fiscal health. You can search for your employer and “bond ratings.” There are firewalls and paid services to wade through, but make sure you find a PDF report of your employer’s bond ratings.

You can be more confident and take a 5-10-year distribution if they have good bond ratings. On the other hand, if they have poor bond ratings or significant lawsuit liabilities, consider taking a lump sum or 3-5-year distribution.

Advanced Concepts in Nongovernmental 457 plans

If your head is already spinning, you have the basics above to confidently decide whether or not to invest in your nongovernmental 457(b) plan. There are other considerations, however, which I will address below for the advanced investor.

Rabbi Trusts

Occasionally, non-governmental 457 plans are placed in Rabbi trusts. These irrevocable trusts protect the assets if there is a change in management but not due to general creditors . Usually, if there is a change in leadership, they will assume the liabilities of the 457 plan, but they can force the distribution of the assets or even claim them as their own. Remember, though, that top management also invests in the nongovernmental 457 plan, so it is in their financial interest to see that a fair outcome is negotiated during a change in leadership.

Employer Contributions

IRC 457 allows annual employer and employee contributions to 457(b) plans . Typically, at least in health care, nongovernmental 457(b) plans just have employ ee contributions. Note that 2023 ERISA plans increased the contribution limit to $22.5k, the same as 457(b) plans.

457(f) plans are different and have different contribution limits.

Non-Governmental 457(f) Plans

Occasionally, you run across non-governmental 457(f) plans in health care, which may be called “Golden Handcuffs.” These are called “ineligible” 457(f) plans and have both employee and/or employer contributions. If the employer is for-profit, these are often informally funded via permanent life insurance products. These life insurance products act as a wrapper to defer taxes on the growth of the assets, which otherwise would require trust income tax payments. In not-for-profit settings, either typical (stocks and bonds) products or life insurance products can be used. These 457(f) plans are complicated! For a comparison of 457(b) vs. 457(f), see this .

Catch-Up Contributions

Plans may have “Catch-up” contributions within three years of normal retirement age. Check the plan documents.

Portability

Occasionally, upon separation of service, you can transfer your non-governmental 457(b) plan to your new employer’s 457(b) plan if both plans allow it. However, this is the exception rather than the rule, so you should not utilize your 457(b) plan early in your career if planning on traditional retirement.

So, what are the rollover options for a 457(b)? Usually, you do not have the option to roll over a non-governmental 457(b) plan. But, because so many miss this point, let’s restate this explicitly. Non-Governmental 457 (b) rollover rules state that you cannot roll over a 457 (b) into an IRA, and most other non-governmental 457(b) plans do not accept incoming rollovers.

Withholding

You are provided a yearly W-2 form, and generally, 20-25% of your distribution is held back for taxes. You can adjust your W-4 plan with your ex-employer and affect withholding.

This is Not a SERP

A supplemental executive retirement plan (SERP) is a type of top-hat plan that provides supplemental pension benefits. These plans typically look at your qualified and social security benefits and give a pension above and beyond those benefits. These are similar to direct benefit plans rather than 457 direct contribution plans.

Non-Qualified Deferred-Compensation (NQDC) Plans

Non-qualified deferred-compensation plans include excess benefit plans (which attempt to give employees options above the IRC 415 limit) and top hat plans. NQDCs can have many different forms and depend on the employer’s or the employee’s goals. Section 457 covers NQDC plans specifically for government and tax-exempt organizations.

Conclusion: Ultimate Guide to Non-Governmental 457(b) Plans

What have we learned?

Well, congress gives our employer the chance to offer us non-qualified benefits to encourage us to save for retirement.

If you work for the government, you are on the gravy train if you have a governmental 457(b).

If you work for a non-profit, you must be careful before investing in your non-governmental 457(b). Many considerations are outlined above, but 457 (b) distribution options trump all other concerns. You cannot roll over your NG 457 (b) plan into an IRA!  If you have a governmental 457 (b) plan, you can.

If your 457 plan has good distribution options, then consider your need for additional tax-deferred savings. And remember the rollover rules or rollover options! Unfortunately, you cannot roll over a non-governmental 457(b) most of the time!

Next, you must have a future tax plan in place. This is why the distribution options are essential to consider.

Not all (or even most!) should consider using their non-governmental 457 plan. But if you do, make sure you understand the limitations and advantages of an additional tax-deferred plan.

10 Comments

This was a fantastic article and really provided clarity when I needed it as my husbands work recently decided to offer a 457. Thank you!

Great article! What bond rating would you think would be safe enough to use a non-governmental 457? Does it have to be at least investment grade or should it be even higher?

Since this is W2 income, can I use it to contribute to a back door Roth?

No. See “What isn’t Compensation” here .

Deferred compensation received (compensation payments postponed from a past year) is explicitly excluded.

Can I use it for qualified charitable contributions?

No, no QDC’s!

Since the annual distributions of the non-governmental 457(b) plan funds are reported as W-2 income, will such income be counted towards your “high 35” years for the purposes of determining your monthly social security benefit?

In Downsides… above, you said: The issue with Medicare and FICA taxes is different than qualified plans. Since this is considered deferred salary, you must pay Medicare and FICA taxes if owed. In addition, when you get distributions, you are issued a W-2 by your employer rather than a 1099 as from a qualified plan. Usually, the salary you defer is above the wage limit for social security, so you just pay the 1.9% FICA tax upon deferral.

So if a person retires with no other employment income and takes annual 457(b) distributions, how do you determine the amount withheld for social security taxes and Medicare? Note this is for someone taking 457(b) distributions for 5 years from age 60-65 and is not on social security or medicare. What is the percentage (social security and medicare) owed for this situation assuming a total W-2 income of $100,000 per year?

Since annual distributions of the non-governmental 457(b) funds are reported as W-2 income, will such income be counted towards your “high 35” years of income for the purposes of determining your monthly social security benefit?

I don’t know! My impression is no but I heard from someone that they were withholding FICA/FUTA. You can look on the 1099 and see a box that says something like income reported to social security. If it is reported to social security, it might. But again, my impression is no.

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What is a 457(b) plan and how does it work?

457 b governmental plans vs non governmental

Key takeaways

  • 457(b) plans are tax-advantaged, employer-sponsored retirement plans offered to some government employees, as well as employees of certain tax-exempt organizations.
  • 457(b) plans are split into 2 different categories—governmental and non-governmental—depending on whether you work for the government or not.
  • Although similar to 401(k)s and 403(b)s, 457(b)s have unique features that could offer more flexibility.

401(k)s and 403(b)s might hog the employer-sponsored retirement plan limelight, but 457(b) plans quietly play a crucial role for many American workers saving for their futures. With flexible withdrawal rules and bonus contribution options, 457(b) plans could be an attractive way to save for retirement if your employer offers one.

What is a 457(b)?

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. Think: law enforcement officers, civil servants, and university workers. When you open a 457(b), typically you set aside pre-tax dollars in the account, reducing your income. Money in the account can be invested and potentially grow until you make withdrawals, at which point you'll pay taxes on what you take out. Depending on your employer plan there may be a Roth option, where you contribute post-tax dollars and then don't have to pay taxes when you take that money out.

There are 2 types of 457(b)s, each with different rules. And it's important to note that here in this article we cover 457(b) plans, not the similarly named 457(f) plans.

What is a governmental 457(b) plan?

Governmental 457(b) plans are sponsored by a government entity. Like with 401(k)s, your contributions are held in a trust and can't be claimed by your employer's creditors. Money saved in a governmental 457(b) can be rolled into other retirement accounts, such as IRAs and 401(k)s.

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What is a non-governmental 457(b) plan?

A non-governmental 457(b) plan, sometimes called a tax-exempt 457(b) plan, is backed by the offering company—perhaps a college or other nonprofit. In a non-governmental 457(b), you tell your employer the percentage of your income you'd like to contribute, but the employer owns the account—not you. If that employer runs into trouble with creditors, your funds could be at risk.

Also, because the account is your employer's and not yours, you can't roll over funds from a non-governmental 457(b) plan into another retirement account and you may not have control over how the funds may be invested. And you can't take a loan backed by the funds in your non-governmental 457(b), like you can with a governmental plan. Another key difference: Whereas you could be automatically enrolled in a governmental 457(b), you have to elect to participate in a non-governmental plan.

457(b) contribution limits for 2023

In 2023, you can contribute up to $22,500 to a 457(b) plan or up to your includible compensation (typically, your taxable wages plus benefits for the year), if that's less than the annual limit. People 50 or over for any part of the year might be eligible to make a catch-up contribution of up to $7,500 to a governmental plan, boosting their 2023 contribution limit to $30,000. Those in non-governmental plans don't have the age 50+ catch-up option.

One caveat: Your plan, particularly if it's a non-governmental plan, might have lower contribution limits than the general max, so check with your plan sponsor. If you work for multiple employers that each sponsor 457(b) plans, you're still limited to $22,500 in contributions in total—not per plan—if you're not eligible for catch-up contributions. But if your employer offers both a 457(b) and a 403(b), as some colleges do, you may contribute up to $22,500 to each for a total of $45,000 in 2023.

Employer contributions are relatively rare for 457(b) plans, but any contributions your employer makes on your behalf count toward the individual contribution limit. Unlike 401(k)s and 403(b)s, there is no separate employer contribution limit for 457(b) plans.

457(b) catch-up deferrals

Another unique feature is that if you're within 3 years of your plan's normal retirement age, your 457(b) plan might allow you to contribute:

  • Up to double the annual limit (if you're not already making the catch-up contributions for being 50 or older) if you are within 3 years of normal retirement as defined by the plan.
  • Or the annual 457(b) limit, plus any amount of unused contribution limit from prior years.

Finally, if your governmental 457(b) plan allows for age-50 catch-up contributions and the 3-year catch-up contributions, you can take advantage of the larger deferral but not both. This could get complicated, so consider reaching out to a tax or financial professional for help.

Check out Fidelity's 457(b) Contribution Limit Calculator 2023

What happens if you contribute too much to a 457(b)?

If you go over the contribution limit, you might be on the hook for tax penalties. If you don't remove excess contributions by April 15 of the next year (usually Tax Day), those dollars could be double taxed: once for the year you or your employer contributed, and again when you take the distribution.

457(b) vs. 403(b)

Although both 457(b)s and 403(b)s are employer-sponsored retirement plans for employees of the government and tax-exempt organizations, there are some key differences.

Flexible withdrawals: Unlike 403(b)s (and 401(k)s), you can withdraw funds from your 457(b) before age 59½ penalty-free if you're no longer employed by the plan sponsor. But you'll still owe income tax on any withdrawals. Governmental 457(b) plans are not subject to the 10% additional tax except for distributions attributable to a rollover from another type of plan or IRA.

Catch-up contributions: Although 403(b)s and 401(k)s allow for catch-up contributions for those 50 and over and so do governmental 457(b)s, only 457(b)s could allow bonus contributions within 3 years of normal retirement age. Some 403(b) plans allow employees who have worked for the plan sponsor for 15 years or more to make additional contributions; 457(b)s do not have a similar loyalty incentive.

457(b) vs. 401(k)

401(k)s is an employer-sponsored workplace retirement plan that is popular with for-profit companies. They too have some important distinctions from 457(b)s.

Employer contributions: Although employer contributions are possible for 457(b)s, state and local governments rarely offer a matching benefit. On the other hand, employer contributions to 401(k) plans are very common. More than 85% of Fidelity-serviced 401(k) plans offer some type of employer contribution.

Employer contribution limits: Although the individual contribution limit is the same for 401(k)s, 403(b)s, and 457(b)s, 457(b)s don't have a separate employer contribution limit, reducing the total amount that could be saved in the plan yearly. With a 457(b) in 2023, the contribution maximum (excluding catch-up or bonus contributions) is $22,500. For 401(k)s and 403(b)s, it's $22,500 for employees and $66,000 for aggregate employee and employer contributions.

Investment options: These are often more limited in 457(b)s than 401(k)s, although it varies plan to plan. A lack of options could make it tougher to diversify your savings according to your risk tolerance and financial goals.

Default risk: Workers' 401(k)s are subject to the Employee Retirement Income Security Act (ERISA), which offers creditor protection for people with those plans. 457(b) plans aren't subject to ERISA. Unlike 401(k)s, savings in non-governmental 457(b)s are at risk from creditors if the sponsoring employer goes bankrupt. Governmental 457(b) plans are protected from creditors.

Inclusion of independent contractors: Independent contractors aren't usually eligible to contribute to an employer-sponsored 401(k), but they could be eligible for their workplace's 457(b) plan, depending on the plan type.

457(b) withdrawal rules

Keep in mind that 457(b) withdrawals are subject to income tax and wage tax (for non-governmental plans), meaning they must be reported as taxable income on that year's tax return. Still, withdrawals can generally happen at any time penalty-free as long as you're no longer employed by the plan sponsor—or if the plan sponsor stops offering the plan.

That being said, you should seriously consider your options before withdrawing from a 457(b) plan. Given that the default withdrawal is a lump sum, your tax liability (aka your tax bill) for that year may increase significantly, which could create a tricky financial situation come tax time if you don't plan correctly. It may be smart to reach out to a financial professional for help before withdrawing from a 457(b).

You might be able to qualify for an early hardship distribution, where you can withdraw funds early penalty-free while still being employed by the plan sponsor. Generally, these are allowed if you're impacted by an event beyond your control that you couldn't plan for, such as an illness, accident, or natural disaster, and you've exhausted other financial options. These distributions could get tricky fast, so consider consulting with a financial or tax pro first.

Finally, just as with 401(k) and 403(b) plans, you must start taking required minimum distributions (RMDs) from your 457(b) on April 1 following the calendar year you turn 73. An exception: You don't need to take RMDs if you're still working for the plan sponsor.

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457 b governmental plans vs non governmental

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IMAGES

  1. What is a 457(b) Plan & How Does it Work?

    457 b governmental plans vs non governmental

  2. 457(b) Plans

    457 b governmental plans vs non governmental

  3. Understanding 457 Plans

    457 b governmental plans vs non governmental

  4. What is a 457(b) Plan & How Does it Work?

    457 b governmental plans vs non governmental

  5. 457 Plan

    457 b governmental plans vs non governmental

  6. 403(b) vs 457(b)

    457 b governmental plans vs non governmental

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COMMENTS

  1. Comparison of Tax-Exempt 457 (b) Plans and Governmental 457 ...

    Yes. Yes. Rollovers to other eligible retirement plans (401 (k), 403 (b), governmental 457 (b), IRAs) No. Yes. Availability of statutory period to correct plan for failure to meet applicable requirements. No. Yes, until 1st day of the plan year beginning more than 180 days after notification by the IRS. Availability of IRS correction programs ...

  2. 457(b) Plans: Governmental vs. Non-Governmental - Downshift ...

    Non-Governmental 457(b) Plans. In a non-governmental 457(b) plan, the funds are not held in a trust. Instead, they're earmarked for future distribution to you. These assets are subject to the employer's creditors in the event of bankruptcy or litigation. Upon separation from the employer, you can't roll the funds over into an IRA or 401(k) plan.

  3. Ultimate Guide to Non-Governmental 457(b) Plans – FiPhysician

    This is the ultimate guide to non-governmental 457 (b) Plans. If you are a highly compensated employee of a non-profit institution and want to know if you should use your 457 plan, chances are you are in the right spot. Many physicians and executives can access a non-governmental 457 (b) plan. Also occasionally known as a Top Hat Plan, they can ...

  4. 457(b) Plans for Governmental and Tax Exempt Entities

    Governmental 457(b) Plans 23 • Individual limitation o Maximum limitation as if all 457(b) plans, regardless of whether the plans are maintained by the same employer, were treated as a single plan o Individual’s responsibility to determine if individual limit exceeded • Military service personnel entitled to USERRA rights Governmental 457 ...

  5. What is a 457(b) plan| Fidelity - Fidelity Investments

    457 (b) plans are tax-advantaged, employer-sponsored retirement plans offered to some government employees, as well as employees of certain tax-exempt organizations. 457 (b) plans are split into 2 different categories—governmental and non-governmental—depending on whether you work for the government or not. Although similar to 401 (k)s and ...

  6. What Is A 457(b) Plan? – Forbes Advisor

    A 457(b) is a type of tax-advantaged retirement plan for state and local government employees, as well as employees of certain non-profit organizations. While the 457(b) shares a few features with ...

  7. Governmental Plans: An Overview and Analysis of Retirement ...

    Rollovers from any “eligible” plan may be allowed. Some governmental employers restrict rollovers to similar plan type (do not allow governmental 457(b) rollovers). Employer Match. Normally this is “tied” to the employee 457(b) salary deferrals. Govt. plan not subject to 401m test (may “skew” benefits). 401(a) Plan Design.

  8. How to Utilize Your Non-Governmental 457 (b) Plan | White ...

    In order to be eligible for a top-hat, non-governmental 457 (b), the preceding year you have to have earned above the highly-compensated employee threshold. Then after you have earned eligibility, you have to wait for access. Often that’s open enrollment in May and June. You may be allowed to elect a different contribution percentage during ...