- There isn't a minimum retirement age
- There isn't a 10% federal penalty for early withdrawal of funds, although withdrawals are subject to ordinary income taxes
- There is a withdrawal option for unforeseen emergencies that meet certain legal criteria, if all other financial resources are exhausted
- Distributions are available in a lump sum, annual installments or as an annuity
- There is no tax withholding if you leave for a new job and roll over your money into an IRA or your new employer's 401(k), 403(b) or 457 plan – or if you take regular installments for 10 years or more. (All other distributions are subject to 20% withholding for federal taxes.)
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Home MenuDeferred Compensation / Retirement Savings
457(b) & Roth IRA Retirement Savings Accounts
Employees may participate in deferred compensation programs, which are designed to supplement your retirement income by saving a portion of each paycheck's pre-tax dollars. The savings and interest earned become taxable when you actually start using the money saved, presumably when you retire. (However, your savings are available at termination of employment and other qualifying events). Four separate programs (Fidelity, Mission Square (ICMA), IPPFA and Nationwide) are available.
Mission Square (ICMA) also offer an after-tax Roth IRA sidecar option to the 457(b) pre-tax retirement account.
IPPFA offers both pre-tax and after-tax 457(b) options.
The information below summarizes the retirement plan contribution limits for 2025.
| Plan | Normal Limit | Age 50 Catch Up Limit | Age 60 - 63 Catch Up Limit | “Pre-Retirement” Catch-up Limit | ||||
|---|---|---|---|---|---|---|---|---|
| 457 | $23,500 | $7,500 | $11,250 | $23,500 | ||||
| ROTH IRA | $7,000 | $1,000 | N/A |
More details on the retirement plan limits are available from the IRS.
457 Plans
The normal contribution limit for elective deferrals to a 457 deferred compensation plan is set at $23,000 in 2024. Employees age 50 or older may contribute up to an additional $7,500 for a total of $30,500. Employees taking advantage of the special pre-retirement catch-up may be eligible to contribute up to double the normal limit, for a total of $46,000.
The normal contribution limit for elective deferrals to a 457 deferred compensation plan is set at $23,500 in 2025. Employees age 50 or older may contribute up to an additional $7,500 for a total of $31,000. Employees age 60 to 63 may contribute up to an additional $11,250. Employees taking advantage of the special pre-retirement catch-up may be eligible to contribute up to double the normal limit, for a total of $47,000.
IRAs
The contribution limit for Traditional and Roth IRAs for 2024 is $7,000. Employees age 50 or older are eligible to contribute an additional $1,000, for a total of $8,000.
Prepare for Retirement With a 457 Plan Designed for Government and Non-Profit Workers
Deferred compensation plans, also known as 457 retirement plans are designed for state and municipal workers and employees of some tax-exempt organizations.
If you participate in a 457 plan, you can contribute a portion of your salary to a retirement account. That money and any earnings you accumulate are not taxed until you withdraw them.
Click on the above link to view a variety of videos and information to prepare for retirement.
This information is appropriate for all employees, from those starting their careers to those close to retirement.
(information provided by MissionSquare Retirement)
The difference between a 401(k) and a 457 retirement plan
Although they’re alike in many ways, there are some differences between 401(k) and 457 plans, particularly when it comes to early withdrawal penalties and minimum required distributions.
With a 457 retirement savings plan:
Keep in mind that federal income tax laws are complex and subject to change. The Village HR Department does not give legal or tax advice. Please consult your attorney or tax advisor for answers to specific questions.
457(b) Plan Roth Contribution Options
In addition to pre-tax contributions, your employer's 457(b) plan may also permit Roth contributions, which are made on an after-tax basis.
What Is a Roth 457(b) Plan?
A Roth is a contribution option within a 457(b) plan. In a traditional 457(b) plan, participants can make pre-tax contributions that are then taxed along with the earnings in retirement. Roth 457(b) contributions differ because they are made after-tax and are not taxed when the assets are withdrawn. Earnings may also be withdrawn tax-free if certain criteria are met.
How Roth 457(b) Plans Work
Roth contributions and associated earnings can be withdrawn tax-free in retirement if the requirements for a "qualified distribution" (also known as withdrawal) are met. If the Roth contribution option is available in your 457(b) plan, you can designate a portion or all of your contributions to the plan as Roth.
When Can Roth Assets Be Withdrawn from a 457(b) Plan?
Distributions of Roth assets (contributions and associated earnings) are qualified if:
- A period of five years has passed since January 1 of the year in which the first contribution (including roll-ins) was made to your Roth account.
- You are at least 59½ years old (or disabled or deceased).
If the requirements for a qualified distribution are not met, and the assets are not rolled into another eligible plan, the earnings portion of any distribution will be taxable.
Benefits of Roth Contributions
In addition to potentially tax-free distributions in retirement, making Roth contributions to your 457(b) plan has the following benefits:
- Higher After-Tax Contribution Limits Than Roth IRAs — 457(b) plans allow for greater after-tax savings. While Roth IRAs only allow a contribution of up to $7,000 for 2024, Roth 457(b) accounts allow contributions with a limit of $23,000 in 2024.
- Eligibility at All Income Levels — Unlike Roth IRAs, everyone with earned income is eligible to make Roth contributions to their employer's 457(b) plan.
- Tax Planning and Flexibility — Having both pre-tax assets and Roth assets available in retirement can be a valuable benefit, allowing you to choose the source of funds most advantageous to your situation at the time of the distribution.
Which Is Better: Roth or Pre-Tax Contributions?
The Roth Analyzer will help you evaluate the benefit of making Roth contributions to your 457(b) plan. Ultimately, you may find that contributing a combination of Roth and pre-tax deferrals makes the most sense. Everyone's situation is different, and you may want to consult a tax advisor before making a decision.
Is a 457(b) Plan an IRA?
A Roth IRA is different from a Roth contribution option in a 457(b) plan. The Roth 457(b) is part of the 457(b) plan, and a Roth IRA is an entirely separate retirement account.
Roth 457(b) vs. Roth IRA
When making Roth contributions as part of a 457(b) plan, those contributions count toward annual maximum contribution limits. If you have a Roth IRA, you can contribute to that separately, up to the annual limit.
There are income requirements for Roth IRAs. If you earned more than $161,000 as a single person in tax year 2024, or $240,000 for married and filing jointly, then you can’t contribute to a Roth IRA.
The Roth contribution option on a 457(b) plan has no income limit.
Roth 457(b) Plan Contribution Limits
Limits for Roth contributions are combined with those of the 457(b) plan’s pre-tax contributions. Any combination of pre-tax or after-tax contributions can be made up to the limits.