Deferred Compensation – 457 Plans
What is a 457 Plan?
A 457 plan is an employer-sponsored (not employer contributed), tax-favored retirement savings account. This type of plan is offered to state and local government employees, including police officers, firefighters, and other civil servants. You can think of the 457 plans as a 401(k) for the government-worker set.
A 457 plan is a lot like a 401(k) or 403(b). These plans all offer individuals a great way to save for retirement, in addition to your CalPERS retirement plan.
A 457 plan is offered through your employer, and contributions are taken from your paycheck on a pre-tax basis, which lowers your taxable income (a good thing come tax time). The interest and earnings on that money are not taxed until you withdraw the funds at retirement. That means the money has the opportunity to accumulate more quickly in the meantime.
The 2023 contribution limits are:
Under age 50: $22,500
Age 50+: $30,000
3 Yr. Special Catch Up: $45,000
You can learn more about each of the plans and find applicable forms below. Please reach out to Human Resources with any questions.
Why Should I participate?
You can start anytime
Your deferred comp plan will work for you whether you're approaching retirement or just getting started investing – putting away money in a tax-deferred account can offer several benefits.
Every little bit helps
Even investing a little bit of money can really add up over time – it's just important to get started! And if you continue to bump up contributions on a regular basis, the overall impact to your paycheck may not seem too painful. Consider putting raises or bonuses into deferred comp – it's an easy way to invest a little more.
Even though you are contributing to your retirement through CalPERS and may have contributed to Social Security in the past, in today’s economic outlook you will never regret having additional funds available for retirement.
CalPERS 457 & Roth Plans
Funds will be invested based on your age and years to retirement. More conservative as you get closer to retirement and more aggressive if you are just starting off in your career. You may also choose to select your own investments.
Empower Retirement (Formerly Mass Mutual)
Options to select a Target Date where you simply choose the funds that are the closest to your target retirement date from a list of options or choose your own investments.
MissionSquare Retirement (Formerly ICMA)
To get investment performance and links to fund profiles, and/or to enroll online, employees can go to our website at www.msqplanservices.org/myplan/305506, check "enroll", enter your information and the City's plan number (305506).
