457 plan

Definition

A tax-exempt deferred compensation program made available to employees of state and federal governments and agencies. A 457 plan is similar to a 401(k) 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), and contributions and earnings are tax-deferred until withdrawal. 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 into an IRA.

Use 457 plan in a sentence

You should try and find a way to use a 457 plan if you think that will be better for all that areinvolved.

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We had a 457 plan and that made me happy because we had been wanting one for a long time now and we finally got one.

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The 457 plan was used by the retirement conscious employee who wanted to plan for his future by investing in himself.

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Cash or Deferred Arrangement credit for qualified retirement savings contribution