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Benefits Administration
Deferred Compensation Plans
403(b) Administrator
457(b) Administrator888-796-3786
844-525-2873
The District offers active employees traditional 403(b) and 457(b) voluntary deferred compensation plans. They allow for the investment of pre-tax earnings, through automatic payroll deductions, to save for retirement. Any pre-tax investment gains/losses are tax-deferred until withdrawn. Pre-tax contributions may also lower current income taxes.
Effective January 2020, active employees will have an additional option to contribute into a Roth 457(b) deferred compensation plan. Unlike contributions to the traditional plans which are made on a pre-tax basis, contributions to a Roth 457(b) are made on an after-tax basis with the benefit that you may be able to withdraw from your account tax-free when you retire subject to the Internal Revenue Service (IRS) rules.
For more resources on the District Sponsored 457(b) plan, visit Voya Financial®.Quick Comparison403(b) Plan 457(b) Plan Roth 457(b) Plan Tax Treatment of Contributions Before Tax Before Tax After Tax Tax Treatment of Earnings Tax Deferred
Tax Deferred Tax Free¹ Tax Treatment of Final Distributions Taxable
Taxable
Tax Free¹ Penalties
10% early withdrawal federal tax penalty if not age 59½ regardless of separation from service.
No 10% early withdrawal federal tax penalty after separation from service. No 10% early withdrawal federal tax penalty after separation from service. Distribution Restrictions Withdrawals made prior to separation from service or prior to age 59½ can only be made due to financial hardship. Withdrawals made prior to separation from service or prior to age 70½ can only be made in an unforeseeable emergency. Withdrawals made prior to separation from service or prior to age 70½ can only be made in an unforeseeable emergency.² ¹ Subject to the Internal Revenue Service (IRS) rules and regulations regarding qualified distributions. A qualified distribution of the Roth 457(b) resulting in tax-free distribution earnings requires that the distribution is made after a 5-taxable-year period of Roth participation and is either:
- made on or after the date you attain age 59½ and separated from service
- made after your death, or
- attainable to your being disabled as defined by the IRS as separation from active service because the person cannot engage in any substantial gainful activity because of a physical or mental condition. A physician determines that the disability has lasted or can be expected to last continuously for at least a year or can lead to death.
The 5-year account holding period, attainment of age 59½, and separation of service are the key factors that result in a tax-free distribution. If the distribution circumstance does not meet all three requirements, the "earnings" portion of the distribution is subject to ordinary income taxation. The "after tax" contributions are never taxed again. The Roth 457(b) is still exempt from the 10% additional excise tax if withdrawn before 59½, but the earnings portion of your account would lose its "tax-free" status if all three criteria are not met.
² For purposes of the 457(b) plan, an unforeseeable emergency is defined by the IRS as a severe financial hardship of the participant or the participant's dependent resulting from an extraordinary or unforeseeable circumstance beyond the control of the participant or the participant's dependent.
