A deferred compensation retirement plan for state and local government employees and certain nonprofits. Unlike a 401(k), the 457(b) has no 10% early withdrawal penalty, making distributions available at any age upon separation.
Why 457(b) Plan matters for employers
457(b) plans allow participants to defer up to $23,000 in 2024 (same as 401(k)) but uniquely permit double the deferral limit ($46,000) during the three years before normal retirement age under the special catch-up provision. Governmental 457(b) plans also allow the standard $7,500 age-50 catch-up. Crucially, 457(b) contributions are not subject to the 10% early withdrawal penalty that applies to 401(k) and IRA distributions before age 59 and a half.
Non-governmental 457(b) plans (offered by some nonprofits) are subject to different rules and significant restrictions. Assets in non-governmental 457(b) plans remain subject to the employer's general creditors, making them riskier for employees than governmental plans where assets are held in trust.
How BEG handles 457(b) Plan for clients
BEG Managed Payroll handles 457(b) Plan as part of a fully managed payroll service at $25-$45 per employee per month. Clients do not need to track compliance rules, filing deadlines, or calculation methods related to 457(b) Plan on their own. Everything is included. Learn about BEG Managed Payroll.
Frequently asked questions
Do employers have to manage 457(b) Plan themselves?
No. A managed payroll provider handles 457(b) Plan as part of full-service payroll. BEG manages this for clients at $25-$45 PEPM with no system migration required.
What happens if 457(b) Plan is handled incorrectly?
Errors related to 457(b) Plan can trigger IRS penalties, state agency assessments, or employee disputes. Catching and correcting errors before filing is far less costly than after-the-fact corrections.
How does BEG handle 457(b) Plan for managed payroll clients?
BEG tracks, calculates, and remits everything related to 457(b) Plan as part of fully managed payroll. Clients do not need to monitor compliance -- that is included in the service at $25-$45 PEPM.
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About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
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