The 457(b) plan is a type of retirement plan that is only available to state or federal employees or employees of tax-exempt organizations, as of 2015, according to the Internal Revenue Service (IRS). It works in much the same was as other more recognizable retirement plans, such as 401(k) and 403(b) plans and is classified as a non-qualified tax-deferred contribution plan, although the 457 plan allows for withdrawals at any time after leaving a job without any age requirements. Unlike 401(k) plans, withdrawals from 457 plans are penalty free.
Contributions to the 457(b) plan are tax deferred, which means that the money is placed into the plan before any tax is paid on it, according to the IRS. The earnings that the money makes in the plan are also tax deferred, which is one of its biggest advantages. Employers and employees can contribute to the plan up to its limit, which is $18,000 for tax year 2015; these are the same limits that are in place on 401(k) and 403(b) plans. The 457 plan can be amended to allow participants to designate Roth contributions or roll over the plan's funds to a Roth account.
Like other common retirement plans, 457 plans have a catchup contribution provision that lets workers over age 50 contribute an initial sum to their plans. This catchup limit is $6,000 for tax year 2015, notes Michigan State University.