For tax exempt entities
457(b) plans are non-qualified deferred compensation plans. They are established by state or local government agencies or tax-exempt organizations, e.g. universities and hospitals. The 457(b) plans work in a similar way as 401(k) plans or 403(b) plans, they allow employees to make salary deferrals contributions.
In addition, employers can make contributions to an employee’s account. Like 401(k) plans and 403(b) plans, contributions are tax deductible, earnings are tax deferred and distributions can be rolled to an IRA. The plan can also be set up so an employee can direct the investment of their account. The rules for nonprofit employers differ from those of governmental entities. Nonprofit employers may allow contributions only for certain key or highly compensated employees, whereas governmental entities may offer the plan to all employees.
For additional information about 457(b) Plans, contact us!