For 2019, workers with a 457(b) plan can contribute up to $19,000 to their account through elective salary deferrals. Accessed Mar. Under the right conditions, a 457 plan participant may be able to contribute as much as $39,000 to their plan in one year in both 2020 and 2021. You’d then repay that money, with interest, typically over a five-year period. While there are similarities between a 457(b) and a 401(k), there are also key differences to keep in mind. The former would use a 401(k) while the latter would have a 457(b) plan, discussed below. For 2019, workers with a 457(b) plan can contribute up to $19,000 to their account through elective salary deferrals. In such cases, the joint participant is able to contribute maximum amounts to both.ï»¿ï»¿. 457 – Offered for state and municipals employees. "Retirement Topics - Who Can Participate in a 457(b) Plan?" A 401(k) retirement plan can be offered by any employer, whereas a 457(b) plan is offered primarily by state and local governments to their employees. Internal Revenue Service (IRS). The contribution limits includes contributions made to the account by both the employer and the employee. As a public employee in North Carolina, you are fortunate Accessed Mar. Rollovers to other eligible retirement plans (401(k), 403(b), governmental 457(b), IRAs) No: Yes: Availability of statutory period to correct plan for failure to meet applicable requirements: No: Yes, until 1st day of the plan year beginning more than 180 days after notification by the IRS 3, 2020. For employees over the age of 50, both plans contain a catch-up provision that allows up to $6,500 in additional contributions.ï»¿ï»¿ ï»¿ï»¿, Withdrawals from a 401(k) taken before age 59Â½ result in a 10% early withdrawal tax penalty. Fortunately, the differences to a 401(k) are not that great and 457(b) plans have some benefits over 401(k)s. The Similarities Just like a 401(k) a 457(b) plan … Rollovers into the Plan • Rollovers accepted only from another Pre-tax 457 plan • Rollovers accepted only from another Roth 457 plan • Rollovers accepted from 401(k) plans, 403(b), 457 plans and IRAs One of the main advantages of saving in this type of account is that it’s a non-qualified plan. "IRC 457(b) Deferred Compensation Plans." In other words, you can take money from your account at any time. That’s because the 457(b)’s contribution limits don’t count against those imposed on the traditional 401(k) (or 403(b) for that matter). This means that it’s not subject to the same withdrawal rules as a 401(k). An employer can designate a 457 account as a Roth account with after-tax contribution. Accessed Mar. Contributing to 401(k) and 457(b) Plans Although 457(b) plans are primarily offered to government employees, certain nonprofit employers can … It typically is offered to state and local government employees, as well as employees of certain tax-exempt organizations. "How Much Salary Can You Defer if Youâre Eligible For More Than One Retirement Plan?" 457 plans are non-qualified, tax-advantaged, deferred compensation retirement plans offered by state, local government and some nonprofit employers. Also, 457(b) accounts allow for special catch-up contributions for workers three years away from normal retirement age. Investopedia requires writers to use primary sources to support their work. Accessed Mar. Earnings in a 401(k) plan accrue on a tax-deferred basis. Your options might include a 401(k) plan or a 457(b) plan. A 408(k) account is an employer-sponsored, retirement savings plan similar to but less complex than a 401(k). 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