If you are employed by a public school or a governmental entity, you may have an opportunity to participate in your employer-sponsored 457(b) plan as an additional way to save toward retirement.
A 457(b) plan is an employer-sponsored plan. So, your employer determines who is eligible to participate in the 457(b) plan and identifies the investment providers available under the 457(b) plan.
Participating in a 457(b) plan offers several advantages:
How much can I contribute?
You make pre-tax deferral (and/or Roth 457 contributions if your plan permits) to the 457(b) plan. The total annual amount of pre-tax and Roth 457(b) contributions you contribute generally cannot be more than the IRS limit ($18,000 in 2017, adjusted annually for cost of living).
In addition, the IRS offers two catch-up contributions:
If you are eligible for both the Age 50+ Catch-up and the Special 457 Catch-up under your 457(b) plan, IRS rules do not allow you to use both in the same calendar year. IRS rules permit you to use the catch-up that lets you contribute the greater amount.
When can I take distributions?
While your plan will determine when you can take distributions, IRS rules allow you to access amounts you have contributed to your 457(b) plan when you have a severance from employment, have an unforeseen emergency, or reach age 70 ½ while still employed. In addition your 457(b) plan may also permit you to take an in-service small amount cash out withdrawal of up to $5,000 if IRS requirements are met. Your beneficiary may take a distribution of your account upon your death. Since your employer's 457(b) plan may be more restrictive than the reasons for withdrawal permitted by the IRS, be sure to check with your employer about specific reasons for distribution permitted under your plan.
Distributions of amounts you have contributed to your 457(b) plan are not subject to an IRS 10% premature distribution penalty tax. However, if you have rolled over to your 457(b) plan amounts from another retirement plan, withdrawals from the rollover account may be subject to the:
Once you are retired, IRS minimum distribution rules require you to begin taking distributions from your 457(b) plan by April 1 of the calendar year following the calendar year in which you are at least age 70 ½.
Your distribution from the 457(b) plan can be paid in a form of benefit as determined under the investment provider's product.
If your 457(b) plan permits, you may be eligible to take a loan from your account balance.
For educational use only.