What is a 457(b) Deferred Compensation plan?
A 457(b) Deferred Compensation plan is an employer sponsored plan that allows employees to deduct pre-tax dollars from their paychecks and contribute the monies into a retirement savings plan. The 457(b) plans pre-tax status is similar to the traditionally offered 403(b) retirement savings plan. 457(b) plans are eligible governmental supplemental retirement plans and as such, are not subject to qualified plan distribution rules.
What are the differences between the 403(b) and 457(b) plans?
Although the 403(b) and 457(b) plans are funded with pre-tax contributions, the plans differ significantly.
403(b) programs are 'Qualified Retirement Plans' under Internal Revenue Code. Once a participant contributes money to a 403(b) plan, he/she can access the funds but may incur an early distribution penalty unless they are at least age 59 1/2 or age 55 and separated from service.
457(b) plans are considered to be 'Eligible Plans' which allows a participant access to their funds at any age upon separation of service without an early withdrawal penalty.
Unlike the 403(b) plan, a 457(b) plan is employer sponsored. This means it is the employer's responsibility for maintaining the plan. All plan transactions such as hardship withdrawals, Loans, Rollovers, Eligibility, and QDRO's must be monitored by the employer.
The TDS Group 457(b) Plan provides the employer with compliance monitoring and full plan administration. Plan transactions and responsibilities will be managed through TDS, thereby relieving the employer of such duties while maintaining a valuable benefit to the employee.
Is the TDS 457(b) Plan different from other 457(b) plans?
The TDS 457(b) plan uses an Open Investment Architecture. This provides a non-proprietary platform of investment choices for employees to select from. Offering multiple vendors allow employees to select a savings plan tailored to their individual goals. TDS does not promote any specific vendor, and we encourage all investment companies to work with our multi-vendor platform.