What is a 457?
Frequently Asked Questions Regarding 457 Plans
What is a 457 plan?
It is a tax-deferred compensation plan. Under Section 457 of the Internal Revenue Code, employees of non-profit 501(3)(c) institutions and public schools can set aside money for retirement on a pre-tax basis through a plan offered by their employer. The federal government created the tax-deferred advantages for 457 contributions to encourage employees to save for their supplemental retirement income.
How does a 457 plan work?
Your 457 contributions are deducted from your paycheck before income taxes are taken out. You don't owe income taxes on your contributions or any earnings on those contributions until you withdraw from the plan.
Who may establish a 457 plan?
Any contract employee of the West Valley Mission Community College District is eligible to participate in the plan through a payroll deduction.
How do I enroll in 457 Plan?
CalPERS 457 has been selected as plan provider. To enroll contact Human Resources Tracey Frizzell at (408) 741-2168 for packet. The District CalPERS 457 plan consultant is Eric Cole, contact number (916) 795-2469 or 1 (888) 225-7377 and send e-mail request to eric_cole@calPERS.ca.gov . Information on the 457 program is available at https://calpers.ingplans.com
How does Payroll get my contribution data?
After you enroll into a 457 program, Tracey Frizzell from Human Resources will submit enrollment data to Payroll Department by the 15th day of each month. Payroll Department will process the data in the current pay period.
What is the Maximum contribution?
The annual contribution limit for 2017 is $18,000. Employees who will or have reached age 50 by the end of the year can contribute an additional amount of $6,000 per year.
How often can I change my contribution amount?
You can change your contribution amount by using a Participant Change Authorization Form. This Form should be received by payroll department from Human Resources by the 15th of the month in order for us to make the change effective in the same month. The total new amount to be changed should not be less than $25.00.
How to get New Enrollment or Participant Change Authorization Form?
You can get forms directly from the plan provider's website: https://calpers.ingplans.com.
What is the 457 plan withdrawal regulation?
Once you withdraw funds from your retirement plan, your distribution is subject to ordinary income taxes. If you withdraw money from your account before you retire (at age 55), there may be a 10% early-withdrawal penalty payable to the IRS on any amount withdrawn. Please check your vendor's Web site for detailed regulations.
Are there exceptions to the distribution penalty?
According to the IRS, a 10% premature withdrawal penalty can be waived if the employee:
- Reaches age 55 and is retired or no longer works for the District,
- Is at least 59 1/2 years old regardless of your retirement status,
- Has died,
- Becomes disabled, or
- Encounters financial hardship
What is the minimum distribution rule?
You must begin distributions no later than April 1st of the year following your 70 1/2 birthday. The minimum distribution rule is governed by the IRC Section 72.
Who should I contact if I have more questions?
Your specific vendor or your tax advisor can answer further questions. Please be advised that a 457 plan is your own personal business investment and the District will not provide advice on which investments to select, nor will the District assist with your contribution calculations. Moreover, the District does not endorse any 457 Plan vendors.
You may also consult the following free IRS publications:
- IRS Publication 571 - Tax Sheltered Annuity Programs for Employees of Public Schools and Certain Tax Exempt Organizations.
- IRS Publication 575 - Pension and Annuity Income,
- IRS Publication 590 - Individual Retirement Arrangements (IRAs)
- IRS Publication 910 - Guide to Free Tax Services,
You may access the IRS Web page on the Internet at www.irs.gov; contact (800) 829-3676 ordering forms and publications; or call (800) 829-4477 to listen to pre-recorded messages covering various topics.