457(b) Deferred Compensation Plan Overview
Below are the important features about your plan. This website is intended to be a summary of the plan provisions. In the event that a conflict exists between the information contained within this website and the plan document, the plan document provisions prevail.
As an employee of an Ohio public university, you are eligible to participate in a 457(b) deferred compensation plan and/or a 403(b) tax deferred annuity program to supplement your Ohio ARP, SERS, STRS, or PERS basic retirement plan if it is offered by your university. What’s more, you can participate in a 457(b) plan without reducing the amount you may contribute to a 403(b) program.
A 457(b) deferred compensation plan is a type of defined contribution plan available under Section 457(b) of the Internal Revenue Code. State and local governmental entities, including public universities, may offer a 457(b) plan. Employee contributions are made on a pretax basis through payroll reduction.
As with the 403(b) Plan, you have choice and control over your investments and you can take your account with you should you sever employment with your university. However, there is no IRS 10% premature distribution penalty tax on withdrawals of 457(b) benefits (if you roll over non-457 money into the 457(b) Plan, that money is subject to the 10% premature distribution penalty tax if withdrawn prior to age 59½).
The annual contribution limit is equal to 100% of includible compensation (as defined by the IRS) or the annual maximum (see chart below). This annual contribution limit is not reduced for contributions made to a 403(b) program, 401 plan, or IRA.
If you are in the last three years prior to attaining your plan's normal retirement age, you have the opportunity to contribute up to twice the normal amount. There is also a special catch-up for those who are age 50 and older. Note that you cannot use both catch-up provisions in the same year. You must use whichever is greater. For more information about these catch-up contributions, contact your Voya Financial® representative.
Distributions are permitted from the 457(b) Plan only under the following circumstances:
- Severance from employment
- Unforeseeable emergency (if elected by your school district)
In addition, the IRS requires that you begin receiving minimum distributions at the later of when you attain age 70½ or retire.
Distributions are taxed as ordinary income in the year the money is received. Unlike a 403(b) or 401 Plan, if the employee severs from employment prior to age 59½, the distributions are generally not subject to a 10% premature distribution tax penalty.
- One loan is allowed every 12 months
- Minimum account balance of $2,000 required
- Minimum loan amount is $1,000
- Net interest rate of 2.5%
Note: Loans and withdrawals may generate an income tax liability, reduce available cash value, and reduce the death benefit.
Voya Financial® has developed several payout options available to you when you are ready to receive a distribution. With these options, the emphasis is on flexibility. You can receive your benefits in any one of the following ways. Remember, taxes are due at withdrawal, so we suggest you discuss your income tax liability with your accountant or attorney before choosing an option:
- distribution over your lifetime;
- distribution over your lifetime and the lifetime of your designated beneficiary;
- distribution over a set time period not extending beyond your life expectancy;
- distribution over a set time period not extending beyond the joint and last survivor life expectancy of both you and your beneficiary;
- a lump-sum, or partial lump-sum distribution in combination with one of the other options;
- an estate conservation option that allows you to receive only the minimum amount required by law at either age 70½ or retirement, whichever comes later; or
- a systematic withdrawal option that provides periodic income for either a specific investment amount, a specific dollar amount, or a specified time period (including your life expectancy) at retirement or separation from service.
Guaranteed Death Benefit
A guaranteed death benefit is available if the beneficiary requests either a lump-sum payment or an annuity option within six months of the participant's death subject to provisions of the plan. Guarantee applies to the claims-paying ability of Voya Retirement Insurance and Annuity Company.
Variable annuities are intended as long-term investments designed for retirement purposes. Early withdrawals from a 403(b) plan will be subject to an IRC 10% premature distribution penalty tax, if taken prior to age 591⁄2. The 10% IRC premature distribution penalty tax on early withdrawals doesn't apply to amounts contributed to 457(b) plans or amounts rolled into those plans from other 457 plans. Money taken from the annuity will be taxed as ordinary income in the year the money is distributed. Account values fluctuate with market conditions, and when surrendered the principal may be worth more or less than its original amount invested. An annuity does not provide any additional tax deferral benefit, as tax deferral is provided by the plan. Annuities may be subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject. However, an annuity does provide other features and benefits, such as lifetime income payments and death benefits, which may be valuable to you.
Neither Voya Financial® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.
Insurance products, annuities and retirement plan funding issued by (third party administrative services may also be provided by) Voya Retirement Insurance and Annuity Company, One Orange Way, Windsor, CT 06095-4774. Securities are distributed by Voya Financial Partners LLC (member SIPC). All companies are members of the Voya ® family of companies. Securities may also be distributed through other broker-dealers with which Voya has selling agreements. Insurance obligations are the responsibility of each individual company. Products and services may not be available in all states.