Why Governmental 457(b) Plans Matter for Your Organization

Governmental 457(b) plans are a powerful tool for public sector employers looking to attract and retain top talent while supporting long-term financial wellness. Unlike 401(k)s, which are common in the private sector, 457(b) plans are specifically designed for state and local government entities—and they offer unique advantages for both employers and employees.

What Is a Governmental 457(b) Plan?

A 457(b) plan is a type of retirement savings account designed for government employees. It lets workers set aside money either before taxes (traditional) or after taxes (Roth), and they’re fully vested right away, meaning the money is theirs from day one. Unlike other plans, there’s no penalty for taking money out before age 59½. These features make it a flexible and appealing benefit for employees, and a smart option for employers looking to offer competitive retirement benefits.

Key Employer Benefits

• Immediate Vesting: Contributions are immediately owned by the employee, simplifying plan administration and reducing long-term liabilities.
• No Early Withdrawal Penalty: Employees can access funds before age 59½ without the typical 10% penalty, offering flexibility during transitions or emergencies.
• Catch-Up Contributions: Employees nearing retirement can contribute significantly more—up to $47,000 in some cases—enhancing their retirement readiness.
• Dual Plan Participation: Employees may contribute to both a 457(b) and a 401(k), doubling their savings potential and increasing plan value.

Why Offer a 457(b) Plan?

Offering a governmental 457(b) plan helps your organization:

• Compete for Talent: Retirement benefits are a key differentiator in public sector hiring. A well-structured 457(b) plan can help you stand out.
• Support Financial Wellness: Flexible contribution options and tax-deferred growth empower employees to take control of their financial future.
• Enhance Retirement Outcomes: With higher contribution limits and no early withdrawal penalties, employees can build stronger retirement portfolios.

Plan Design Flexibility

Governmental 457(b) plans can be tailored to meet your organization’s goals. Options include:

• Roth contributions
• Service credit purchases (for pension integration)
• Special catch-up provisions
• Integration with other retirement plans (401(k), 403(b), IRA)

Let’s Make a Plan Together

A governmental 457(b) plan gives public employees a chance to save for retirement just like folks in the private sector. It’s flexible, tax-friendly, and helps you build a solid financial future. Plus, it can help government employers attract and keep great talent by offering competitive retirement benefits.

Thinking about offering a 457(b) plan to your team? We’re here for you. At Fisher\SMB, we can help you sort through the rules to figure out which benefits make sense for your employees. Contact us to talk about how we can help you build the right retirement plan for your company.