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457(b) Plans Named after IRS code 457, a 457(b) plan is a non-qualified deferred compensation plan for states, counties, cities, agencies, and their political subdivisions or agencies. Deferred compensation is a contractual agreement between an organization and an employee wherein the organization makes an unsecured promise to defer the compensation of the employee to some future date for services currently performed by the employee. Annual contributions are made through salary deduction up to $11,000 or 100% of salary [under EGTRRA], whichever is less. Distributions are made upon retirement, termination of employment, extreme financial hardship or at death to the named beneficiaries. One nice benefit of the 457 plan is that in the last three years before the plan's normal retirement age, a participant can "catch up" on contributions missed in earlier years, with some restrictions. Upon retirement, participating employees have various options for withdrawing funds. They can take out a lump sum, purchase an annuity or simply start drawing out money on a periodic basis from their current account. Unlike most other retirement plans, withdrawals may be taken from a deferred compensation account upon separation from service without incurring the 10% penalty for early distributions, even prior to age 59. 457(b) Deferred Compensation Plan Detailed Summary Plan Adoption And Contribution Deadlines Must be established by the employer's fiscal year end. Employer matching
contributions, if applicable, must be made by end of employer's fiscal
year, including extensions Employee Eligibility Requirements Governmental employer has complete discretion, subject to state law Funding & Maximum Contributions Employee-funded. The lesser of 33 1/3% of includible compensation contributions
(gross salary less all pre-tax deferrals) or $8,500 per year (indexed)
in 2001, less any employer contributions Employer contributions are optional. Maximum employer contribution up
to $11,000 (indexed) in 2002, less any employee contributions Catch Up provision is available, if eligible, up to $15,000 contribution
limit per calendar year for three years prior to normal retirement age
Withdrawals & Loans Hardship withdrawals available only in the event of an unforeseeable
emergency Distributions Distributions to employees upon separation from service, death, attainment
of age 70½, or an unforeseeable emergency Administration And Reporting Non-discrimination rules do not apply NOTE: The Economic Growth and Tax Relief Reconciliation Act of 2001 [EGTRRA] has brought about sweeping changes in the rules governing retirement plans. Please consider these changes as you address issues surrounding your retirement plan decisions. For more detailed information and answers to specific questions about this new Federal legislation please visit the Federal Legislation Update section of this website or contact us directly at 847-550-0144 or e-mail us at info@gfsginc.com. Back to 401k / 403b / 457b - Pension Plans LEGAL NOTICES
Global Finanical Services Group
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