Governmental 457(b) Plan

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Governmental 457(b) Plan

Governmental entities such as local municipalities can establish 457(b) plans that allow their employees to save and sometimes more for retirement on a pretax or Roth aftertax basis.

Governmental 457(b) plan

Governmental entities such as local municipalities can establish 457(b) plans that allow their employees to save up to $18,000 and sometimes more for retirement on a pretax or Roth aftertax basis.

What is a 457(b) plan?

A governmental 457(b) deferred-compensation plan allows employees of states, political subdivisions of a state, or any agency or instrumentality of a state to invest money on a pretax or Roth aftertax basis through salary reductions. The employer deposits amounts withheld into an annuity, custodial, or a trust account, where the funds accumulate tax-deferred or potentially tax free in the case of Roth aftertax contributions until withdrawals commence, usually at retirement. Lord Abbett supports 457(b) assets being invested via a plan trust account.

How does a governmental 457(b) plan work?

An employer establishes a Lord Abbett 457(b) plan by completing an adoption agreement and an individual at the entity becomes the named trustee. The employees complete individual contribution election forms, indicating how much they want to save ($18,000 maximum, $24,000 if age 50 or older) through salary deferrals.

Who should consider a 457(b)?

  • A governmental employer looking to attract, reward or retain employees
  • A governmental employer that wants to offer their employees an easy and affordable retirement plan to help them save for retirement
  • A governmental employer that wants to supplement an existing retirement plan, such as a defined benefit1 program or a 403(b)2 program


What are the benefits of a 457(b)?

  • Contributions and earnings are tax-deferred or potentially tax-free until withdrawn
  • Pretax or Roth aftertax contributions are the savings options
  • There are no required withdrawals until the later of age 70½ or separation from service
  • An employee may contribute the maximum ($18,000) amount to both a 457(b) and 403(b)2 plan if available
  • Participants can roll their account over to an IRA
  • Employees within three years of retirement may be able to make additional contributions through a special catch-up contribution

1A defined benefit plan is a pension program generally funded with employer dollars that promises the participant a percentage of pay or flat dollar amount at retirement age, usually age 65.

2A 403(b) is a type of employer-sponsored retirement plan available generally to employees of nonprofit and educational organizations (e.g., public schools) defined in Section 501(c)(3) of the Internal Revenue Code. A 403(b) retirement plan allows the participants to save their own money on a pretax or Roth aftertax basis.

To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax information contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (ii) promoting, marketing, or recommending to another party any transaction, arrangement, or other matter.

RELATED RESOURCES


  457(b) Plan Brochure
  2017 Retirement Plan Limits

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