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 2019, the IRS will allow individuals under the age of 50 to contribute $19,000 per year, and age 50 and over, up to $25,000 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
- 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 an ordinance 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”.