What is a 457(b) plan?
Section 457 of the IRC (Internal Revenue Code) allows agencies of tax-exempt employers and employees of both local and state governments to reserve money for retirement on a pre-tax basis. The employer sponsors this plan and the federal government has created tax advantages for 457 contributions. This Plan differs from others because state and local governments that have non-qualified deferred retirement plans under the IRC section 457 must obtain all assets from the plan as well as income in trust for the sole benefit of plan participants and their beneficiaries as determined in 1996 by the Small Business Job Protection Act.

How does a 457(b) plan work?
A 457(b) plan allows employees to set money aside for retirement on a pre-tax basis. The employee decides the amount of money to contribute to the plan during each pay period, up to a predetermined maximum amount, set by the IRS. The employee does not owe income taxes on contributions, or the earnings on these contributions, until the money is distributed from the plan. In order to make deductions from the plan the employee must meet the requirements of distributable event; examples of common distributable events include separation of services or retirement.

What are the benefits of having a 403(b) & a 457(b) plan?
By offering both plans, an Employer can expand investment options, allowing employees to take advantage of contributing higher dollar amounts. Under the Internal Revenue Code ("Code"), participants can make a maximum overall tax-deferred contribution to each of the plans equal to the lesser of 100% of your includible compensation or the applicable dollar amount (see chart below).

Special "catch up" contributions could allow certain employees to defer even greater amounts than listed in the above chart.

457(b) plans differ from other retirement plans in that withdrawals may be taken from the participant's account upon separation from service without incurring the 10% penalty for early distributions even prior to age 59 ½.

Gatekeeper provides 457(b) and 403(b) third party plan administration (TPA) for your organization's benefit plans. We provide our 457(b) and 403(b) consulting services as an independent. We feel this enables us to provide a more comprehensive program to your organization and staff.