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457(b) Plans

What is a 457(b) Plan?

A 457(b) plan is a nonqualified deferred compensation plan maintained by:

• State or local governments or any agency thereof.
• Tax exempt organizations, including universities and hospitals.

There are two types of 457 plans - eligible plans which are described under code Section 457(b) and ineligible plans described in Code Section 457(f). Non-profit employers may allow contributions only for certain key or highly compensated employees. Government employers may include all employees.

There are various limits, both individual and corporate, that need to be monitored within a retirement plan. While these limits are independent, each has an affect on the others.

• Deferral Limit: The lesser of 100% of gross compensation or $16,500 (2010).
• Age 50 catch-up contribution: Persons age 50 and over may defer an additional $5,500 deferral in 2010. This contribution is not included in the 415 limit.
• 457(b) special catch-up contribution: Employees within 3 years of Normal Retirement Age may take advantage of a special catch-up election, which is generally double the deferral limit for the years.
• 415 Limit: Personal Limit - The lesser of 100% of gross compensation or $16,500 (this includes any employee and employer contributions).

Compensation Limit: $245,000