What is a 457 Plan?
A 457 plan is a tax-advantaged, deferred compensation retirement plan offered by state governments, local governments, and some nonprofit employers. 457 plans are similar in nature to 401(k) plans, only rather than being offered to employees at for-profit companies, they cater to state and local public workers, together with highly paid executives at certain nonprofit organizations, such as school districts and charities.
How does a 457 plan work?
Participants of this defined contribution plan set aside a percentage of their salary, payroll deducted, for retirement. Participants are allowed to contribute up to 100% of their salary, provided it does not exceed the applicable dollar limit for the year. These funds are transferred to the retirement account where they grow in value without being taxed until withdrawn.
