A tax-exempt deferred compensation program made available to employees of state and federal governments and agencies. A 457 plan is similar to a 401k plan, except there are never employer matching contributions and the IRS does not consider it a qualified retirement plan. Participants can defer some of their annual income (up to an annual limit), while contributions and earnings are tax-deferred until withdrawn. Distributions start at retirement age, but participants can also take distributions if they change jobs or in certain emergencies. Participants can choose to take distributions as a lump sum, annual installments or as an annuity. Distributions are subject to ordinary income taxes and the amounts cannot be transferred to an IRA.
Last Updated: 9/23/2012 10:05:00 PM