Life · Chapter 11 · Salary Reduction Plans
Section 457 Plan
Definition
Deferred compensation plan for state and local GOVERNMENT employees and certain nonprofits. Deferred amounts are excluded from gross income until received or made available; annuity contracts and custodial accounts are authorized funding vehicles, and governmental 457(b) assets must be held in trust for the exclusive benefit of participants (§ 457(g)). Deferral limits similar to 401(k).
Exam tip
Match the letters to the employer: 401(k) = private business · 403(b) = schools/nonprofits (501(c)(3)) · 457 = state & local government.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms