Definition of 457 Plan

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457 Plan definition

Define 457 plans: A 457 plan is similar to a 401(k) [ 401k definition ] plan in broad detail, except that it is available for governmental and certain other employees including, in limited circumstances, independent contractors. In general, a 457 plan is an employer-sponsored, defined contribution, retirement plan. It is named after the section of the IRS code which defines the plan. The savings plan allows workers to save for retirement by making tax-deferred contributions. Usually, the contributions are withheld from the paycheck, and usually they are matched in part or in whole by the employer. Usually, employer matching funds are subject so some period of vesting.


In general, taxes are paid on a 457 plan as funds are withdrawn at or after retirement. Funds may be withdrawn prior to retirement, but when this is done the disbursement usually is subject to substantive penalties and full taxation.



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