457 Retirement Plans

Similar to popular 401(k) plans

You’ve probably heard of 401(k) plans created primarily for employees of private companies.

The 457 plans are designed for state and municipal workers and employees of some tax-exempt organizations. In both plans, participants may contribute a portion of their salary into a retirement account. That money and any earnings that you accumulate are not taxed until you withdraw them. 

But there are differences

Although they’re alike in many ways, there are some differences between 457 and 401(k) plans, particularly when it comes to early withdrawal penalties and minimum required distributions.

For instance, in a 457 plan:

• There is no minimum retirement age.
• Nor is there a 10% federal penalty for early withdrawal of funds, although the withdrawal is subject to ordinary income taxation.
• Distributions may be taken on separation from employment, at death, and as a result of an unforeseen emergency. However, before your request can be approved, you must show that the financial emergency meets the legally mandated criteria for an unforeseeable emergency and that you have exhausted all other financial resources.
• They may be taken in a lump sum, in annual installments or as an annuity. Except for "rollovers," annuities, and regular installments over 10 years or more, all other payments will have 20% withheld automatically for federal taxes. 
• Proceeds also may be transferred to an IRA or a new employer’s 401(k),
  403(b) or 457 plan that accepts transfers from an old employer’s plan.
• Federal income tax laws are complex and subject to change. Neither the company nor its representatives give legal or tax advice.  Please consult your attorney or tax advisor for answers to specific questions.

Not a deposit • Not FDIC or NCUSIF insured• Not guaranteed by the institution • Not insured by any federal government agency • May lose value