What is a 457 Plan?
A 457 plan refers to a non-qualified, tax-advantaged deferred compensation retirement plan. Eligible employees are allowed to make salary deferral contributions to the 457 plan. Earnings grow on a tax-deferred basis and contributions are not taxed until the assets are distributed from the plan.
Employees are allowed to defer up to 100% of compensation not exceeding the applicable dollar limit for the year.
Benefits of a 457(b) Plan
Contributions deduct from an employee's wage before tax, which lowers taxable income. For example, if “Tim” was earning $4,000 per month and contributing $700 to his 457(b) plan, his taxable income for the month is $3,300. Employees have the option to invest their contributions in a selection of mutual funds; any interest and earnings earned do not get taxed until funds are withdrawn. If an employee resigns, or retires before age 59.5 and needs to withdraw their funds, they do not have to pay a 10% penalty fee, unlike 401(k) and 403(b) plans.
Some of the approved vendors offer a ROTH option. A Roth 457(b) is funded with after-tax contributions from the participant. The participant does not get a tax deduction in the year that contributions are made. However, earnings and returns on amounts in a Roth 457(b) are tax-deferred if the withdrawals are qualified distributions.
403 (b) and 457 Plan Vendors
Midland Public Schools utilizes a third party administrator to manage its plans, MEA Financial Services. (MEAFS) All transactions and form submissions are processed by MEAFS. Contact information is as follows:
Leslie Brown, TPA Coordinator
800-292-1950, Option 4
Choosing your Plan and Your Vendor