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What Is a 457 Plan?
A 457 plan is a tax-advantaged retirement savings plan offered to employees of many state and local governments and some nonprofit organizations. Like the better-known 401(k) plan in the private sector, the 457 plan allows employees to deposit a portion of their pre-tax earnings in an account, reducing their income taxes for the year while postponing the taxes due until the money is withdrawn after they retire.
A Roth version of the 457 plan, which allows after-tax contributions, may be allowed at the employer's discretion.
There are two main types of 457 plans:
- The 457(b): This is the most common 457 plan and is offered to state and local government employees and nonprofits. It is a retirement savings plan that offers tax advantages to participants.
- The 457(f): This plan is offered only to highly compensated executives in tax-exempt organizations. It is a supplement to the 457(b) and it is, essentially, a deferred salary plan.
Key Takeaways
- The 457 plan is an IRS-sanctioned, tax-advantaged employee retirement plan.
- The plan is offered only to public service employees and employees at tax-exempt organizations.
- Participants are allowed to contribute up to 100% of their salaries up to a dollar limit for the year.
- The interest and earnings in the account are not taxed until the funds are withdrawn. The exception is the Roth option, if available, in which only post-tax money is deposited.
Watch Now: What Is a 457 Plan?
Types of 457 Plans
As noted, the 457 plan comes in two flavors, the 457(b) and the 457(f).
The 457(b) Plan
The 457(b) plan is most often offered to civil servants, police personnel, and other employees of government agencies, public services, and nonprofit organizations such as hospitals, churches, and charitable organizations.
It is similar to a 401(k). Participants set aside a percentage of their salary into a retirement account. The employees choose how their money is invested from a list of options, mostly mutual funds and annuities.
The account grows in value without being taxed over the years. When the employee retires, taxes will be due on the amount withdrawn.
Employees are allowed to contribute up to 100% of their salary, provided it does not exceed the dollar limit set for the year.
If the 457 plan does not meet statutory requirements, the assets may be subject to different rules.
457(b) Contribution Limits
As of 2022, employees can contribute up to $20,500 per year to 457 plans. This limit increases to $22,500 for 2023.
In some cases, workers are allowed to contribute even more. For example, if an employer permits catch-up contributions, workers over the age of 50 may pay in an additional $6,500 a year, making their maximum contribution limit $27,000 ($20,500 + $6,500) in 2022. The catch-up contribution increases to $7,500 for tax year 2023, making the maximum contribution limit $30,000 ($22,500 + $7,500).
Also, 457(b) plans feature a "double limit catch-up" provision. This is designed to allow participants who are nearing retirement to compensate for years in which they did not contribute to the plan but were eligible to do so.
In this case, employees who are within three years of retirement age may contribute up to $41,000 in 2022 and up to $45,000 in 2023.
Advantages and Disadvantages of a 457(b) Plan
The 457(b) plan has all of the advantages of a 401(k), although there are some differences.
Advantages of a 457(b)
Tax Benefits
If a traditional rather than a Roth plan is chosen, the contributions are deducted from an employee's paycheck on a pre-tax basis. That amount is subtracted from the employee's gross income, effectively lowering the person's taxes paid for that year. For example, if Alex earns $4,000 per month and contributes $700 to a 457(b) plan, Alex's taxable income for the month is $3,300.
Employees invest their contributions in their choice or choices from a selection of annuities and mutual funds.
All interest and earnings generated from year to year remain untaxed until the funds are withdrawn.
Withdrawals Without Penalty
There is one big difference between the 457(b) and other tax-advantaged retirement plans: no penalty for early withdrawals in some circumstances.
If an employee retires early or resigns from the job for any reason, the funds can be withdrawn without incurring a 10% penalty from the IRS. Early withdrawals from most retirement plans are subject to the penalty except for certain hardship reasons. (The penalty was waived for two years during the COVID-19 pandemic.)
A 457(b) account holder can take a penalty-free withdrawal without changing jobs, like a 401(k) account holder. The list of acceptable reasons, however, is limited to "unforeseeable emergencies."
Exceptions to the Rules
Early withdrawals from a 457(b) are subject to the 10% penalty if the account holder rolls the funds over from a 457 to any other tax-advantaged retirement account, such as a 401(k). This would happen if, for example, a government employee quit to take a job in the private sector.
In addition, anyone who takes money out of a retirement account early must keep in mind that any income taxes due on that money will be owed in the year that the withdrawal is taken.
Disadvantages of a 457(b) Plan
One potential advantage of most tax-advantaged retirement savings plans is the employer match. An employer may choose to match some portion of an employee's contribution to the plan. An employer who matches the first 3% of the employee's contribution, for example, is presenting the employee with a 3% raise.
Employer Match Is Rare
Employers can match their employees' contributions to a 457(b) but, in practice, most don't.
If they do, the employer contribution counts toward the maximum contribution limit. This is not the case for 401(k) plans.
For instance, in 2022, if an employer contributes $10,000 to a 457(b) plan, the employee can add only $10,500 for the year until the $20,500 contribution limit is reached (except for those eligible to use the catch-up option).
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Looser rules for early withdrawals without a penalty.
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Early distributions allowed for participants who leave a job.
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As with other retirement plans, no taxes are due until money is withdrawn.
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Employer contributions count toward contribution limit the year they vest.
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Employer contributions subject to vesting schedule. If the employee quits, non-vested funds are forfeited.
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Limited investment choices compared to private sector plans.
457(b) vs. 403(b)
The 403(b) plan, like the 457(b), is mostly available to public service employees. They are a particularly common benefit offered to public school teachers.
The 403(b) has its origins in the 1950s when it exclusively offered an annuity to participants. Participants still have the option of creating an annuity but they also can choose to invest in mutual funds.
In fact, the 403(b) has changed over the years until it closely resembles the private sector's 401(k) plan, although the investment choices offered to participants are relatively limited.
The annual contribution limits are identical to those of the 457(b) and 401(k) plans.
If you're a public employee, your employer may well offer a 457(b) or a 403(b).
Advisor Insight
Dan Stewart, CFA®
Revere Asset Management, Dallas, TX
457 plans are taxed as income similar to a 401(k) or 403(b) when distributions are taken. The only difference is there are no withdrawal penalties and that they are the only plans without early withdrawal penalties. But you also have the option of rolling the assets in an IRA rollover. This way, you can better control distributions and only take them when needed.
So if you take the entire amount as a lump sum, the entire amount is added to your income and may push you into a higher tax bracket.
With the rollover route, you could take out a little this year, and so on as needed, thus controlling your taxes better. And while it remains inside the IRA, it continues to grow tax-deferred and is protected from creditors.
What Is the Difference Between a 457(b) Plan and a 457(f) Plan?
The 457(b) plan is a version of the 401(k) plan that is designed for public and nonprofit workers. It helps employees save for retirement while deferring the tax bill until they retire and start withdrawing the money. (The Roth version, which is available only at the employer's discretion, takes the taxes upfront, so no taxes are usually due on withdrawals.)
The 457(f) plan is also known as a SERP for Supplemental Executive Retirement Plan. It is a retirement savings plan for only the highest-paid executives in the tax-exempt sector. They are mostly employed in hospitals, universities, and credit unions.
A 457(f) is a supplement to a 457(b). Employers make additional contributions to the employee's account, beyond the usual limits. These are negotiated by contract and amount to a deferred salary adjustment.
If the executive resigns before an established vesting period, the 457(f) contribution disappears. The plan is intended as an executive retention strategy, commonly known as "golden handcuffs."
Is a 457(b) Plan Better Than a 401(k) Plan?
For all intents and purposes, a 457(b) is just as good as a 401(k) plan. If you're employer is a public agency or a nonprofit, it's probably your best option for retirement savings.
Assuming you opt for a traditional plan rather than a Roth plan, you'll be lowering your taxable income from year to year while plunking that money into a long-term investment account. The money won't be taxed until you retire and start taking withdrawals.
(If it's a Roth, you'll pay the taxes up front and usually will owe no taxes on the money you deposited or the profits it earns over the years.)
On the downside, your contributions will probably not be matched by your employer. But that's just reality in the nonprofit sector, not a rule of the plan.
How and When Can I Make Withdrawals From My 457(b) Account?
One advantage of a 457(b) is that you can take early withdrawals without paying a tax penalty for any "unforeseeable emergency." This isn't a good idea, since you're plundering your retirement savings, but unforeseeable emergencies do happen. And, you'll owe income tax for that year on the amount you withdraw.
The required minimum distribution (RMD) you must take is determined by an IRS worksheet. An RMD is a minimum amount that must be withdrawn from certain retirement plans, like a 457(b), each year once you reach a certain age. If you were born between 1951 and 1959, the age is 73. If you were born in 1960 or after, the age is 75. This is an increase from the previous age of 72.
NBC News based its description of the vaccine-eligible population groups on estimates provided by Surgo Ventures, a nonprofit with a focus on health problems, and Ariadne Labs, a joint center for health systems, which were in turn based on a variety of government data sources. These estimates, described here in greater detail, take some groups, such as high-risk workers, and classify them into subgroups, such as doctors and nurses. The groups are then assigned to a state's vaccination phase. For example: the group designated as first responders (police and firefighters) were placed within an essential group. The estimates take into account overlap between groups, and follow the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) guidelines. The dynamic vaccination map showing the number of fully vaccinated people across the U.S. and the number of allocated vaccines that have been used is based on data from the CDC. NBC News ranks each place’s progress on vaccine distribution based on the percentage of the distributed vaccine used. The information on vaccine distribution in states, Washington, D.C. and Puerto Rico came from NBC News research efforts. NBC News researchers reached out to state health department officials and examined their web sites, and they gathered information from state and health department press conferences. Official social media communications were also used. Covid-19 vaccination locations were sourced from state, county, district, health district and territory health departments. This data was collated and then mapped.
To create a project management plan, first put together a high overview of the basics of your project, including the project’s scope, schedule and budget. Next, build on those basics to write an executive summary. Then, add a project timeline, risk assessment, stakeholder chart, communication plan and resource management plan to your executive summary. Lastly, gather and incorporate stakeholders’ insights to perfect and create buy-in for your plan.
1. Identify Baselines for Your Project
Your project’s baselines should first focus on the project’s scope, then the project’s schedule and, finally, its budget. The result should be a high overview that will inform the rest of your planning process. To complete this step, answer the following questions:
- What is a summary of the project’s deliverables, including the expected features in order of priority?
- What important milestones will help us complete this project?
- What should the project not focus on? (set some scope boundaries)
- When is the project scheduled to begin?
- When should the project be complete?
- How much do we have to spend on this project? If it is a project that needs to be completed for a client, what budget do we have to spend on it while still making a set profit margin?
2. Write an Executive Summary
An executive summary should include a definition of your project, your project’s value proposition, including the problem your project addresses and its solution, milestones and their deliverables, scope limits―and the consequences for changing these limits―goals and financial breakdown. Use the answers to the questions posed in step one to put together your executive summary.
As the face of your project before stakeholders, your executive summary should be visually appealing and succinct. Columns and visuals should break it up to make it easy to read quickly. One great tool for creating an attractive and succinct summary is a Canva executive summary template. You can customize a template to match your brand and add your content, then either obtain your executive summary or share it in link form.
To begin, sign up for Canva for free, then use the search box titled “What will you design?” for “executive summary” and press “enter.” Click the appropriate template for your purposes and brand, then use the tools on the left-hand side of the enlarged template to customize its colors, text and images. Add pages by clicking the plus sign at the top right-hand corner of the template and proceed to add text and customizations to complete your summary.
3. Plot Your Project’s Timeline
The best way to plot your project’s timeline is with a Gantt chart. A Gantt chart is a visual representation of what activities you plan to begin and complete and when. These activities are usually small chunks or milestones of your completed project. They also formulate the scope of your project, helping to reduce scope creep later on. Gantt charts are often the easiest to use to plot your timeline.
It is important to note expected dependencies on your Gantt chart. A dependency happens when one activity on a timeline must be completed before team members can go on to the next one. For example, a prototype needs to be completed before a focus group analysis of the prototype can take place. Thus, these two activities are dependent. Also note independent activities that can be completed even as other activities are underway, thereby saving time.
Pro tip: An easy way to note dependencies and independent activities is via color-coding. Arrows drawn on your Gantt chart can also help to pinpoint dependencies.
While Canva does offer Gantt charts to plot your project’s timeline, there are also platforms that specialize in producing Gantt chart software. Not only can this software help you put together your Gantt chart, but it can then help you stay on track with its timeline and avoid scope creep once your project begins via task descriptions and automations. If paying for such a service isn’t in your project’s budget, you can also create a Gantt chart in Excel or Google Sheets.
Gantt chart from monday.com
4. Define Stakeholder Roles
With your project activities recorded on your timeline, define who will be responsible for each activity. Your plan serves as a guiding star to all stakeholders involved in your project, so it’s best to record responsible parties in an intuitive chart. Create a project team chart to show who will be involved in completing the project and for which activities each is responsible. For collaboration ease, also note who each person is accountable to and their contact information.
Canva offers organizational or team chart templates you can use to customize for the needs of your project. Search “organizational chart” using the search bar in your Canva account. Click the chart that best suits your project and brand needs. Then, use the design menu to upload pictures of your team members, customize colors and replace template text to offer the data your stakeholders need for easy collaboration during the life of your project.
An example of a Canva organizational chart template to be adapted to create a project team chart.
5. Perform a Risk Assessment
Your risk assessment should begin with a list of obstacles that could impact your team’s ability to complete the project on time negatively at all and with the desired quality. It should then create a plan for each risk by addressing what might trigger the risk, steps that lend to risk prevention and how to mitigate a risk should it happen. Finally, it should assign stakeholders to manage risk triggers, prevention and mitigation. Some teams use a SWOT analysis to help identify strengths, weaknesses, opportunities and threats in this stage.
To dive into each risk, answer the following questions:
- What could happen that would negatively impact the project?
- At what point in the project timeline is this risk most likely to happen?
- How likely is the risk to happen?
- What events or factors would trigger this risk?
- What steps can be taken to reduce the chances of this risk taking place? How can we avoid this trigger or these triggers?
- What would be the expected outcome should the risk happen anyway?
- How could we mitigate a negative outcome should the risk take place?
- Who would be the best person to manage each risk’s triggers, prevention or mitigation?
As you assigned responsible parties for each project activity, you likely selected people who had expertise in the areas in which their assigned activities fall. For example, if you assigned the graphic design of a marketing project to a team member, that person is likely a graphic designer. Their expertise is invaluable in assessing graphic design risks and their prevention and mitigation steps. Lean on your team for this expertise, and then implement their suggestions.
6. Create Key Subplans
Two key subplans you should include in your project management plan are a resource and communications management plan. Your resource sub plan should list what resources are needed to complete your project and their availability. Your communications plan should include how your team will communicate one-on-one and team-wide.
Resource Management Plan
A resource subplan can be completed in project management software. You can create columns for estimated expenses and other needed resources broken down by milestones, such as raw products and talent. Other customizable resource reports are available within the software and automatically kept up to date. Wrike, for example, offers customizable reports where you can track resource availability and export reports to include in your plan.
An example of Wrike’s customizable resource reports
Communications Management Plan
While it may seem inconsequential compared to your risk assessment and resource plan, poor communication is the primary reason most projects experience scope gaps and project failure, according to a PMI study. Poor communication can, therefore, derail all your other planning efforts.
As such, your communications management plan should be detailed and address what, when and how information will be shared during your project. Details should focus on what needs to be communicated and at what intervals during the project execution, stakeholders’ communication preferences, a communication schedule for virtual meetings or phone calls that occur at planned intervals, who will review tasks, to whom task completions should be reported and what platforms or tools should be used for communication purposes.
Pro tip: For best results, look at the communication tools available in your project management software. Alternatively, consider what communication-tool integrations it offers. For example, most project management software offer integrations with Slack. Using available tools within your software will allow ease of collaboration and the communication visibility your team needs to stay on the same page and on track.
7. Gather and Incorporate Feedback From Stakeholders
The team you have chosen to own the activities on your project timeline are uniquely capable of doing so. As such, they are likely to have recommendations you might not think about to make your project more successful. Moreover, if their insights are incorporated into the plan, they are more likely to enthusiastically follow it. So, get your team together and go over the details of your plan. Learn from them and incorporate their insights.
In addition, present your plan to the end-user or client for whom you are executing the project. Make sure they agree to the project scope and its deliverables. Make their preferred changes now so you don’t have to make them later. Discuss what will happen if they change their minds later―extra fees, for example―so that scope creep does not impact your project’s successful execution, on-time completion or quality final deliverable negatively.
HOLMDEL – The township introduced a plan to negotiate the purchase of the land housing the historic Horn Antenna Tuesday, including plans to invoke eminent domain to acquire the property if negotiations fail.
The resolution passed Tuesday would begin negotiations with developer Crawford Hill Holdings, owned by Rakesh Antala, to acquire the land on which an 18-ton Horn Antenna resides on.
The Horn Antenna, which was designated a national historic landmark in 1989, was instrumental in providing evidence of the Big Bang. Physicists Arno Penzias and Robert Wilson received a Nobel Prize in Physics in 1978 for their work.
In documents submitted to the township, Crawford Hill Holdings and its contract purchaser Burke Contracting LLC have proposed developing 88 townhomes on the site.
On Tuesday, the township passed a resolution approving the start of negotiations with Crawford Hill Holdings to purchase the property, as well as an introduced ordinance allowing $2 million as a starting point to pay for it. But it also introduced an ordinance authorizing the use of eminent domain, which allows government entities to forcibly take property from private citizens, with compensation, under certain conditions.
The property, known as Crawford Hill and located at 791 Holmdel Rd., was part of the old AT&T monopoly. AT&T built two buildings in the 1960s: the Bell Labs facility, which is now the office complex known as Bell Works, and an annex three miles away, which is home to the Horn Antenna.
In the next decades, the annex changed hands from AT&T to Lucent, to Alcatel-Lucent to Nokia and then to Antala for $3.6 million in 2020.
On tax maps, the property is known as block 27, lots 6, 6.01 and 7.
The Horn Antenna resides on lot 6. Both lot 6 and 6.01 consist mostly of open space. Lot 7 contains the former Nokia building.
The resolution and two ordinances
The township committee passed a resolution and introduced two ordinances Tuesday night.
The resolution would kick start “bona fide negotiations” for lots 6 and 6.01 as well as a partial easement, which consists of the road to drive to the Horn Antenna, on lot 7. It was unanimously approved.
According to Mayor D.J. Luccarelli, “if good faith negotiations fail,” the township would use eminent domain to take the property. The first ordinance authorized the use of eminent domain.
The second ordinance is a bond ordinance for $2 million to pay for the property, make a down payment or finance the acquisition process. According to Luccarelli, the $2 million will not result in a tax increase, but comes from the township’s Open Space, Recreation, Floodplain Protection, Farmland and Historic Preservation Trust Fund. Residents voted to increase their own taxes for the trust fund in 2022.
The two ordinances were unanimously introduced and would be voted on for final adoption on Tuesday, August 22 at 6:30 pm at Town Hall.
“Under the state’s Eminent Domain Act, the first procedural requirement (for) condemnation proceedings, (is to) engage in good faith negotiations with the property owner to determine if it can be acquired without litigation,” township attorney Michael Collins said. “In the event that those events fail, the next procedural step would be to formally file in Superior Court a condemnation action, which cannot occur until good faith negotiations conclude and good faith negotiations have to run at least 14 days.”
Collins said the land was appraised “based on the highest and best use under the current zoning.”
Gagliano & Company, the Little Silver based appraiser hired by the township, valued the land at $1.92 million.
In its report, it notes that “The demand for office space is declining, and this trend is not expected to slow or stop.”
In a press release dated August 2, Antala questioned the appraisal.
“How do you assess such a unique site? … What price do you put on that? $10 million? $20 million? $50 million?”
He said, “It does not appear that an appraiser budgeted for a modest sum of $7,000 will be able to provide the in-depth and expert analysis required to fairly value this unique site.”
Lot 7
While the township is looking to acquire most of the property under the procedure outlined in the resolution and two ordinances, lot 7 with the former Nokia building will follow a separate procedure.
A blight study conducted by the township planner will look into whether lot 7 would be considered an area in need of redevelopment for condemnation purposes.
Collins said, “The redevelopment law provides a significant tool kit to municipalities to address issues involving blighted properties, older buildings, things of that nature. Only then can the township committee contemplate approving a redevelopment plan, which essentially serves as zoning specific to that lot, which the redevelopment plan authorizes.”
He noted that Bell Works is a result of redevelopment.
The planning board will hear a presentation on the blight study on Tuesday, August 15 at Town Hall. If it votes in agreement with the study, the township committee would then vote to begin looking at redevelopment plans.
“Hypothetically, if the township condemns a property with a building on it, once the condemnation goes through, the township gets titled to the property and the building with all its you know wart or whatever on that property as of that date,” Collins said.
The township could then work with a third party to demolish buildings and construct other structures on the site.
The developer’s view
In a statement, the developer rejected the potential use of eminent domain.
Antala said that his limited liability company has never intended to move or harm the antenna. He said special interest groups have politicized the issue and asked residents to “put aside the irrational fears, shut off the political posturing.”
He said, “We want nothing more than to have honest negotiations with the town officials and open-minded residents — based on facts not fear. We are more than willing to work in good faith as before and develop alternate options where the Horn Antenna is preserved and open space is maintained.”
Resident’s Views
Ralph Blumenthal, vice chair for the township’s zoning board, said, “We’re pleased that you’re making progress with this preservation project.”
Meredith Thomas, a teacher at Indian Hill School, said she approved of the township committee’s action during Tuesday’s meeting.
“Let us not forget that it was on this soil that a groundbreaking discovery occurred,” she said. “A discovery that reshaped our understanding of the universe. In addition to preservation, I also implore you to consider a restoration project for this site.”
Olivia Liu is a reporter covering transportation, Red Bank and western Monmouth County. She can be reached at oliu@gannett.com.
This article originally appeared on Asbury Park Press: Holmdel could use eminent domain to take BIg Bang Horn Antenna land
Dr. Lucent is a Biophysics Researcher, who recently joined the Division of Engineering and Physics, as an Assistant Professor in Physics and Bioengineering. He specializes in the rational design of enzymes using computational techniques. He has used these enzymes for bioremediation efforts including detoxification of pesticides believed to be responsible for bee colony collapse. He conducted his research in Australia’s national laboratory, CSIRO (Commonwealth Scientific Industrial Research Organization) in Melbourne, Australia, for the past three years prior to joining our Division.
Wilkes students will benefit from Dr. Lucent’s other excellent research experience stemming from his Ph.D. studies at Stanford University analyzing the forces and mechanisms activating the self-assembly process of protein folding. His research is critical for opening pathways to the understanding, preventing, and curing of Alzheimer’s disease, Cystic Fibrosis, Parkinson’s and other diseases caused by faulty protein folding.
Dr. Lucent’s addition to our Division brings our students access to Stanford University’s “folding at home” computer network, (folding.stanford.edu), allowing students to engage in hands-on, computational-simulations and cutting-edge research with other scientists worldwide, a capability unavailable at most other engineering schools, especially at an undergraduate level.
Dr. Lucent will be joining Wilkes’ physics professor, Dr. Walter Placek, to spearhead the Division’s new B.A. in Physics degree, launching this semester. The degree will be offered along with a minor in education in order to fill the need for high school physics teachers. His goal is to implement a program that has the flexibility to allow students to pursue interdisciplinary physics research at the undergraduate level. He will also be an instructor in the M.A. Bioengineering program.
