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About 457(b)
What is a 457(b)
plan?
A 457(b) plan is
a tax-deferred (pre-tax) retirement savings plan made available to
employees of governmental and certain non-profit organizations.
Contributions to the plan are invested in mutual funds, bond funds,
or other investment vehicles and grow tax free until withdrawn.
Contribution
Amounts
You are limited
to the amount you may contribute to the 457(b) plan each year.
Generally, you may contribute up to $17,500* per year. However,
various “catch-up” options may allow you to contribute more than
$17,500*. If you are over age 50 you may contribute an additional
$5,500*. Or there is a catch-up option available to some employees
entering their final 3 years of employment prior to attaining normal
retirement age which may allow for up to $17,500* additional to be
contributed.
Your employer may
also elect to make 457(b) contributions on your behalf. But your
and your employer’s contributions may not exceed the $17,500* limit
(or more if catch-up eligible).
Transferring
Funds
The funds in your
457(b) plan may be transferred to a different 457(b) plan that is
offered by your employer at any time and for any reason.
Withdrawing Funds
The following are
events that will allow you to withdraw funds from your account and
either receive the money directly or rollover the money to a
different retirement plan:
·
Termination of employment from your current employer
·
Disability
·
Death
·
Unforeseeable emergency
Direct
withdrawals may generally be made in the form of a lump sum
distribution or in an annuity payment.
Loans may also be
taken from your 457(b) plan. Consult with your FBC financial
advisor for additional details.
Interaction with
403(b)
To learn more
about 403(b) plans click
here.
You may
contribute to both the 457(b) and 403(b) plans concurrently.
Therefore, if you desire to maximize your tax deferred savings
opportunities you may wish to contribute to both plans. Each plan
has separate $17,500* base contribution limitations (which may be
higher if you qualify for a catch-up provision).
Differences
between the 403(b) Plan and the 457(b) Plan
For detailed
information about 403(b) plans click
here.
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403(b) |
457(b) |
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·
Withdrawing funds prior to age 59 ½ incurs a 10% early
withdrawal penalty levied by the IRS. |
·
No 10%
penalty for early withdrawal. |
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·
Attainment of age 59 ½ qualifies as a distributable event
that permits you to withdraw funds from your account. |
·
Attainment of age 59 ½ does not qualify as a distributable
event. |
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There
are many vendors who offer 403(b) plans within your
district. |
·
The
FBC Plan
may be the only 457(b) option within your district. |
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·
403(b)
plans may permit you to exceed the $17,500* annual
contribution limit if you have at least 15 years of service
with our current employer. |
·
No 15
years of service catch-up option. |
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·
No
catch-up for entering your final 3 years of services of
service prior to retirement. |
·
457(b)
plans may allow you to exceed the $17,500* annual
contribution limit if you are entering your final 3 years of
employment prior to retirement. |
*2013 figures
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