A 457(b) pre-tax plan is a governmental deferred compensation plan that allows participants to make tax-deferred contributions each pay period, which are then invested and potentially grow usually until retirement. The Maryland State Retirement Plans (MSRP) 457(b) Deferred Compensation Plan allows State employees to get the same benefit, through a program that’s specifically tailored to the needs of Maryland public employees.
The money is not taxed until it is withdrawn – usually in retirement, when you may be in a lower tax bracket. There is also an after-tax Roth 457(b) (PDF) option is also available. Roth 457(b) investment earnings may be taken tax-free in retirement as long as certain requirements are met. When contributing to both 457(b) and Roth 457(b), you’re still limited to a combined maximum contribution, as defined by the IRS. See the plan comparison chart (PDF) for full details.
Remember, investing involves market risk, including the possible loss of the money you’ve saved. As you get started in the plan, we’ll help you understand market risk and strategies that may help you deal with it.
Additional 457(b) features
In addition to tax-deferred investing, the 457(b) plan also offers these features, and more:
- Contributions to more than one plan at a time – you may contribute to a 457(b) while also contributing to a 401(k) and/or a 403(b) Plan (if you work for a State educational institution), as long as you don’t exceed the current IRS contribution limits. See the plan comparison chart (PDF) for details.
- Catch-up contributions – you can take advantage of both the age 50 or older catch-up option, and the Special 457(b) Catch-up provision (available in three years before the year of your normal retirement age), to catch-up and contribute more to your plan, as long as you don’t exceed current IRS contribution limits.
- Rollovers – you can roll money into your 457(b) plan from other qualified retirement plans, however there are important criteria to consider. Also, upon leaving State employment, you can roll your money into another qualified retirement plan. See the plan comparison chart (PDF) for more information.
- Unforeseeable emergency withdrawals – you may take an unforeseeable emergency withdrawal from your plan account, as long as certain qualifications are met.
- Loans – as long as certain qualifications are met, you may be eligible for a loan. You are obligated to pay it back, with interest.
For a complete look at all of the MSRP 457(b) plan features, benefits and restrictions take a look at the plan comparison chart (PDF).
Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when you can access funds. Assets rolled over from your account(s) may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59 ½. Neither Nationwide nor any of its representatives give legal or tax advice. Please contact your legal or tax advisor for such advice.
Get the help you need
Talk to one of our Team MSRP Retirement Specialists if you have questions about plan options.