457 Plans

How These Plans Work
  • State governments, political subdivisions of a state, and any agency of either can offer their employees a 457 plan; these are referred to as “state plans”
  • Organizations that are tax-exempt under Internal Revenue Code Section 501(c) can offer a select group of highly compensated or management employees a 457 plan
  • Employees save for retirement with pretax contributions that are fully vested at all times
  • Contributions in state plans must be deposited in a trust maintained by a corporate trustee
  • Contributions in 457 plans of tax-exempt organizations may be retained by the organization or deposited into a Rabbi trust
  • Employees in state plans who are age 50 or over can make catch-up contributions, but not employees in 457 plans maintained by tax-exempt organizations
  • Employees can contribute an amount, in parts or all at once, equal to one-year’s IRS prescribed annual limit during any of the last 3 years before normal retirement
  • Plans can permit employees to withdraw from their accounts to meet an unforeseeable financial hardship
Things To Note
  • Employee contributions are not subject to nondiscrimination tests
  • Employee pretax contributions and catch-up contributions must not exceed IRS prescribed annual limits
  • State plans are exempt from ERISA’s annual return/report requirements
  • 457 plans of tax-exempt organizations are exempt from ERISA’s annual return/report requirements if they only cover a select group of highly compensated or management employees
  • A special type of 457 plan allows for unlimited pretax contributions by employees, as long as these contributions always remain subject to a substantial risk of forfeiture; to avoid forfeiture, employees must perform substantial services for the employer in the future
What We Can Do
  • Evaluate your objectives and recommend possible plan designs
  • Consult with you on regulatory changes and emerging trends
  • Assist in vendor searches to find appropriate service providers for your plan
  • Help with employee communications, including communication materials, employee meetings and workshops
  • Prepare plan documents, plan amendments, and communications to employees
  • Provide administration for your plan – daily valuation or traditional recordkeeping, process distributions, including preparation of required governmental information related to distributions from the plan
  • Assist you with any IRS or DOL audit of your plan