457(b) Plan

Section 457(b) of the tax code covers two kinds of plan. Governmental plans, run by states, cities, counties and other public bodies, are the common kind, and they work much like a 401(k): deferrals come out of each paycheck into a trust held for participants, and the plan may offer designated Roth contributions, loans and automatic enrollment. Tax-exempt organizations such as nonprofit hospitals and private universities can offer a 457(b) too, but only to a select group of managers or highly paid staff, and that version behaves more like executive deferred compensation.

Money leaves a 457(b) only on specific events: severance from employment, reaching 59½ while still employed (70½ in a non-governmental plan), an unforeseeable emergency such as an illness, accident or natural disaster, a small balance, or the end of the plan. Pre-tax withdrawals are ordinary income, and required minimum distributions apply later in life, as in other workplace plans.

One quirk catches people out: employer contributions to a 457(b) count inside the same $24,500 limit as your own deferrals. In a 401(k) or 403(b), employer money uses separate room under the larger $72,000 total-additions limit.

The 457(b) limit is its own. The IRS adds up your deferrals to 401(k), 403(b) and SIMPLE plans against one personal limit, but a 457(b) sits outside that group, so a public employee offered both a 403(b) and a governmental 457(b) can defer the full amount to each.

Two limits still bite. Deferrals in each plan cannot exceed 100% of your includible compensation. And if your FICA wages from the employer topped $150,000 in 2025, your 2026 age-based catch-up contributions must go in as Roth; a plan without a Roth option cannot accept them at all.

A 457(b) can offer a second, larger catch-up for people who under-saved earlier in their career. It is open only in the three tax years that end before the year you reach the plan’s normal retirement age. The plan sets that age, and may let you choose it: no earlier than 65 or the age at which the employer’s pension would pay full benefits, whichever comes first, and no later than 70½.

In each of those years your limit becomes the lesser of twice the basic limit, $49,000 for 2026, or the basic limit plus all the room you left unused in earlier years you were eligible for the plan. If you always deferred the maximum, there is nothing to catch up.

In a governmental plan you cannot combine it with the age-50 catch-up in the same year; you use whichever gives the larger figure. The special catch-up may still go in pre-tax, even for higher earners whose age-based catch-ups must be Roth. Because it depends on records of every earlier year, ask the plan administrator for your unused amount before you elect it.

Withdrawals from a governmental 457(b) are not subject to the 10% early-withdrawal tax, whatever your age when you leave the job. The one exception is money rolled into the 457(b) from another type of plan or an IRA, which keeps its old exposure. Income tax still applies to every pre-tax dollar.

That makes a 457(b) unusually useful for early retirement. Before 59½, a 401(k) or 403(b) usually escapes the 10% tax only through the rule of 55, if you leave in or after the year you turn 55, or a rigid series of 72(t) payments, apart from narrower exceptions such as disability. A 457(b) can pay for the years between a 50-year-old’s last paycheck and 59½ with nothing extra owed.

The advantage belongs to the account, not to you. Roll a 457(b) into a rollover IRA and the money falls under IRA rules, where withdrawals before 59½ generally owe the 10% tax. Before consolidating accounts, consider keeping in the plan whatever you may need before 59½.