What is a Deferred Compensation Plan (457b)?
A 457 plan, named after IRS code 457, is a non-qualified deferred compensation plan for government agencies. This type of program allows employees to defer wages on a pre-tax basis through payroll deduction. The plan also offers the Roth option, which allows contributions to be made post-tax and a tax-free benefit at retirement.
Who Can Participate?
All employees, both full time and part-time, are eligible to participate in the plan. Supervisors, solicitors, and engineers may also participate.
How much can I contribute?
For 2020, the IRS will allow individuals under the age of 50 to contribute $19,500 per year, and age 50 and over, up to $26,000 per year. Employees may elect to make pre-tax deferrals up to 100% of their taxable income.
What are the Advantages?
- Accumulate savings to replace earnings at retirement
- Contributions can be made pre-tax (Traditional) or post-tax (Roth)
- Reduces your current federal income tax
- Immediate plan entry date
- The participant has control of investments to meet individual goals
- Changes in investment allocation can be made at any time
- Account balance and learning tools available 24/7 on the Internet
- Participant reports will be mailed quarterly
- Contributions can be changed at any payroll period effective for the first of the next month
- Contributions can be stopped at any time
- Upon termination, funds can be rolled into a new employer plan
How do I enroll my employees in the 457 Plan?
Contact PSATS Trustees Insurance Fund for the following forms:
- Complete an Installation Checklist.
- Adopt a resolution to comply with the Pennsylvania Intergovernmental Cooperation Act
- Adopt the “Supplemental Participation Agreement”
- Order Retirement Guides for your employees.
- Have each participating employee complete the enrollment form, the investment election form, and the beneficiary form.
- Mail all of the above to the “PSATS Trustees Insurance Fund”.