457 plans

457 plans are tax-advantaged retirement plans similar to 401(k)s, offered by state and local public employers and certain tax-exempt employers.

What is a 457 retirement plan?

457 plans are retirement savings vehicles that can be established by state and local governments, public schools and tax-exempt organizations as described in IRS code section 501(c)(3), such as nonprofit hospitals and charities. Religious and religion-controlled organizations are specifically excluded from sponsoring a 457 plan.  

Types of 457 plans

  • Governmental 457(b) plans are made available to generally all employees by state and local governments and public schools. 
  • Tax-exempt 457(b) plans made available to a select group of managers or highly compensated employees by 501(c) tax-exempt organizations (excluding religious and religion-controlled organizations). 
  • 457(f) plans made available to a select group of managers or highly compensated employees usually by tax-exempt organizations and rarely by government entities.

It's important to note that while of all these plans are called 457, the provisions for each plan type vary widely. Our focus here is the Governmental 457(b) plan since it’s the most common among the three types.

Benefits of a governmental 457(b)

  • Pretax and Roth salary deferrals are allowed.
  • Contribution limits are separate from other retirement plans. This means that individuals who participate in a 457 plan and another deferral program, such as a 403(b) or 401(k) plan, can contribute the maximum amount to both plans.
  • The 10% early withdrawal penalty does not apply to distributions taken directly from the governmental 457(b), regardless of the individual's age. For example, if an individual separates from service at age 45, they can access their savings without paying a 10% IRS penalty.

Governmental 457(b) contributions

Contributions to governmental 457(b) plans can realize some tax benefits. For example: 

  • Pretax salary deferrals are excludable from a participant's federal income tax and thus not subject to federal income tax withholding. These contributions have the potential to grow tax deferred. 
  • Some plans allow employees to make Roth (after-tax) deferrals. While these deferrals are not excluded from federal income tax at the time of the contribution, there may be additional benefits at the time of distribution. 

Governmental 457(b) contributions limits

Similar to most retirement savings accounts, contribution limits can change each year. Total contributions, including employee salary deferrals and employer contributions, cannot exceed the lesser of 100% of the employee's compensation or the applicable limit below. To be eligible for a catch-up contribution, individuals must be age 50 or older by year-end.



Deferral Limit



Catch-up (age 50 or older)



Governmental 457(b) catch-up contributions – Two different types

A governmental 457(b) Plan has two different types of catch-up contributions: 

  • The age-based catch-up for individuals age 50 or older by year-end (see chart above for limit); or, 
  • Service-based catch-up, which is double the applicable limit.
    • Participants are eligible for this if they are in the last three years prior to normal retirement age (as defined by the plan document). This requires a special calculation; consult with a tax professional.

Participating in a 457 plan and another retirement plan

Employers can choose to maintain a 401(k), 403(b) or 457 individually or they can choose to pair a 401(k) plan with a 457 plan or pair a 403(b) plan with a 457 plan. When an individual participates in more than one salary deferral plan, their employee salary deferral contributions to both plans are usually limited to the 402(g) limit, which is $19,500 (2021) and $20,500 (2022). 

However, the 457 plan is not subject to the 402(g) limit. This allows individuals who are participating in a 457 plan in addition to another salary deferral plan to contribute up to the salary deferral limit in each plan. For this reason, many public school districts have decided to offer governmental 457(b) plans in addition to an existing 403(b) or 401(k) plan, to allow employees to take advantage of the contributions limits in both plans, potentially doubling their salary deferral contributions. 

Three of the biggest differences between governmental 457(b) plans and 401(k)/403(b) plans are: 

  • No IRS distribution penalty applies if an individual takes a distribution before age 59 ½. 
  • The plan's service-based contribution catch-up, which is double the applicable limit in the last three years prior to the year of attainment of the plan's normal retirement age. 
  • The contribution limit includes employer and employee contributions.

Governmental 457(b) plan withdrawal requirement and distributions

Typically, a distribution from a governmental 457(b) plan can occur only as a result of a specific triggering event. 

  • Participant separates from service 
  • Participant reaches age 70½ (for individuals who attained this age in tax year 2019 or prior) or age 72 (beginning in tax year 2020) 
  • Unforeseeable emergencies 
  • Plan termination (all participants become 100% vested) 
  • Divorce when a qualified domestic relations order (QDRO) is issued

Depending upon plan provisions, it may be possible to distribute account balances of less than $5,000 (excluding rollover dollars), where the participant has not actively contributed to the plan for two years. 

Taxation of distributions

Determining what's taxable when taking a distribution from a governmental 457(b) depends on what type of money is in the plan. Of course, eligible rollovers to an IRA are not subject to taxation. 

  • Pretax money
    Any distribution not rolled over will be taxed as ordinary income. A 10% early withdrawal penalty does not apply to distributions taken directly from the governmental 457(b), regardless of the age of the individual. If an individual is younger than 59½, it may be beneficial to leave assets in the 457(b) if they foresee requiring a distribution for personal expenses. 
  • Roth money
    Qualified distributions of Designated Roth contributions and earnings can be taken tax-free.

Required minimum distributions

Generally, individuals must begin taking a required minimum distribution (RMD) from their plan in the year they turn 70½ (for individuals who attained this age in tax year 2019 or prior) or age 72 (beginning in tax year 2020) and each subsequent year. Individuals who are still working with the employer sponsoring the plan may delay their RMDs until April 1 of the year following retirement if the option is available in their plan. 

How we can help

Our financial advisors will work closely with you to evaluate all the retirement options available to you. We invite you to meet with an Edward Jones financial advisor and get started today.

Important information:

This information is for educational purposes only. Edward Jones, its employees and financial advisors cannot provide tax or legal advice.