A 457 plan is a type of tax-advantaged retirement savings plan available to employees of state and local governments, as well as certain non-profit organizations. It is named after Section 457 of the Internal Revenue Code (IRC) that governs its tax treatment. Here are key features of a 457 plan:

### 1. **Types of 457 Plans:**

– **457(b) Plans:**
– Most common for state and local government employees and employees of certain tax-exempt organizations. Contributions are made on a pre-tax basis, reducing taxable income.

– **457(f) Plans:**
– Often used for highly compensated employees. Contributions may be made on a pre-tax or after-tax basis, depending on plan design. These plans are subject to different tax rules.

### 2. **Employee Contributions:**

– **Pre-Tax Contributions:**
– Employees can contribute a portion of their salary to the 457 plan on a pre-tax basis, meaning contributions are deducted from their gross income before taxes.

– **Catch-Up Contributions:**
– Participants aged 50 and older can make additional catch-up contributions, similar to other retirement plans.

### 3. **Employer Contributions:**

– **Employer Matches:**
– Some employers may offer a matching contribution to the 457 plan, providing additional funds for the employee’s retirement savings.

– **Non-Elective Contributions:**
– Employers may make non-elective contributions on behalf of employees, which are not tied to the employees’ contributions. These contributions are made at the employer’s discretion.

### 4. **Tax Advantages:**

– **Tax-Deferred Growth:**
– Contributions and investment gains in a 457 plan grow on a tax-deferred basis. Taxes are deferred until withdrawals are made in retirement.

– **Pre-Tax Contributions:**
– Employee contributions are made on a pre-tax basis, reducing the participant’s taxable income for the year.

### 5. **Withdrawal Rules:**

– **Distribution Age:**
– Withdrawals from a 457 plan are generally allowed penalty-free after the age of 59½.

– **Unforeseeable Emergency Withdrawals:**
– In certain situations, participants may be allowed to take unforeseeable emergency withdrawals, subject to specific criteria.

– **No Early Withdrawal Penalty:**
– Unlike some other retirement plans, there is no early withdrawal penalty for taking distributions before the age of 59½. However, regular income taxes apply.

### 6. **Investment Options:**

– **Investment Choices:**
– Participants in a 457 plan typically have a range of investment options to choose from, such as mutual funds, stocks, and bonds.

### 7. **Portability:**

– **Job Changes:**
– When employees change jobs, they can often roll over their 457 plan into another eligible retirement plan, such as a 401(k) or another 457 plan.

### 8. **Limitations and Considerations:**

– **Governmental vs. Non-Governmental Plans:**
– Different rules may apply to governmental (457(b)) and non-governmental (457(f)) plans.

– **Catch-Up Contributions:**
– Participants aged 50 and older may make additional catch-up contributions, subject to IRS limits.

It’s important for employees to review the specifics of their employer’s 457 plan and make choices that align with their financial goals and retirement objectives. Financial advice from a professional advisor can be beneficial in making strategic decisions about retirement savings.