A 457(b) plan is a tax-deferred retirement account for employees of state and local governments and certain tax-exempt organizations. In 2026, you can defer up to $24,500 of your salary, and if your plan is a governmental one, you can take the money out at any age without the 10% early withdrawal penalty that hits most other retirement accounts. The 457(b) also sits alongside a 401(k) or 403(b) with its own separate limit, so eligible workers can contribute to both plans in the same year.
Who Can Participate
Two kinds of employers can sponsor a 457(b). One is a state or local government entity: agencies, cities, counties, public school districts, and political subdivisions. The other is a tax-exempt organization under the Internal Revenue Code, such as a 501(c)(3) nonprofit.1Office of the Law Revision Counsel. 26 USC 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations Which type of employer you work for changes almost everything about how the plan behaves.
Governmental 457(b) plans are open to the general public workforce. Teachers, police officers, firefighters, city staff, and state agency employees commonly participate. The assets sit in trust for the participants, much like a 401(k).
Non-governmental 457(b) plans, sometimes called Top Hat plans, can only cover a select group of management or highly compensated employees. Assets remain the property of the employer and are exposed to the employer’s general creditors if the organization goes bankrupt or loses a lawsuit. Participants stand behind those creditors in line, which makes non-governmental accounts less secure than their governmental counterparts.2Internal Revenue Service. Non-Governmental 457(b) Deferred Compensation Plans
2026 Contribution Limits
The basic annual deferral limit for 457(b) plans in 2026 is $24,500, or 100% of includible compensation, whichever is less.3Internal Revenue Service. Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs That ceiling covers everything going into the plan, including any employer contribution. This is a real departure from how a 401(k) works. In a 401(k), employer matching sits on top of your personal deferral limit; in a 457(b), it does not.4Internal Revenue Service. Retirement Topics – 457(b) Contribution Limits If your employer contributes $3,000, you can only defer $21,500 of your own salary that year.
Catch-Up Contributions
Governmental 457(b) plans offer up to three separate catch-up provisions. Non-governmental plans have access to only one. The rules interact, so it helps to see them side by side.
Age 50 and Over
If you are at least 50 by year-end and participate in a governmental 457(b), you can add another $8,000 on top of the base $24,500 limit, for a total of $32,500 in 2026.3Internal Revenue Service. Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs This is the same age-50 catch-up available in a 401(k) or 403(b). Non-governmental 457(b) plans do not offer this catch-up.5Office of the Law Revision Counsel. 26 USC 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations – Section: (e)(18)
Ages 60 Through 63
Under the SECURE 2.0 Act, governmental 457(b) participants who turn 60, 61, 62, or 63 during the calendar year get a larger catch-up: $11,250 for 2026, in place of the standard $8,000.3Internal Revenue Service. Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs Combined with the base deferral, that allows up to $35,750 in total contributions. Once you turn 64, the amount drops back to the regular age-50 catch-up.
Three-Year Special Catch-Up
Both governmental and non-governmental 457(b) plans can offer a separate catch-up during the three consecutive tax years before you reach the plan’s normal retirement age. Within that window, you can defer up to twice the regular annual limit, or $49,000 in 2026.6Office of the Law Revision Counsel. 26 USC 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations – Section: (b)(3)
There is a catch. The doubled limit is only available to the extent you undercontributed in prior years. The plan looks back at every year you were eligible and calculates how much room you left unused. If you always maxed out your deferrals, this catch-up gives you nothing extra. If you contributed lightly earlier in your career, you can recapture that unused space now, up to the $49,000 cap.
You cannot combine the three-year catch-up with the age-50 or age-60-through-63 catch-up in the same year. The plan applies whichever produces the larger contribution.5Office of the Law Revision Counsel. 26 USC 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations – Section: (e)(18)
Roth Contributions
Many governmental 457(b) plans now offer a Roth option alongside the traditional pre-tax deferral. You pay income tax on Roth contributions in the year you make them, but qualified distributions come out entirely tax-free, growth included. A distribution qualifies if at least five years have passed since January 1 of the year of your first Roth contribution and you are at least 59½, disabled, or deceased.
Both types share the same $24,500 annual limit. You can split contributions between them, but the combined total cannot exceed the cap.
Starting in 2027, a SECURE 2.0 provision requires catch-up contributions to be made as Roth contributions for participants whose prior-year wages from the sponsoring employer exceeded $145,000 (adjusted annually for inflation).7Internal Revenue Service. Treasury, IRS Issue Final Regulations on New Roth Catch-Up Rule, Other SECURE 2.0 Act Provisions Plans can adopt the rule earlier on a voluntary basis. Below that income threshold, catch-up contributions can still be made pre-tax.
Stacking a 457(b) With a 401(k) or 403(b)
The 457(b) deferral limit is completely independent of the limits for 401(k) and 403(b) plans.8Internal Revenue Service. How Much Salary Can You Defer if You Are Eligible for More Than One Retirement Plan A public university employee with access to a 403(b) and a governmental 457(b) can defer up to $24,500 into each plan in 2026, for a combined $49,000 in elective deferrals before any catch-ups. Add the age-based catch-ups to both plans and the total climbs further. This is one of the strongest features of the 457(b), and few other retirement arrangements allow anything comparable.
Getting Money Out
A 457(b) distribution becomes available when one of three things happens: you separate from service with the sponsoring employer, you reach age 70½ while still working, or you have an unforeseeable emergency.9Internal Revenue Service. Chapter 6 – Section 457 Deferred Compensation Plans Every distribution is taxed as ordinary income in the year you receive it.
No 10% Early Withdrawal Penalty
This is where governmental 457(b) plans stand apart. Distributions are not subject to the 10% additional tax that normally applies to withdrawals taken before age 59½, provided the money originated in the 457(b) and was not rolled in from a 401(k), 403(b), or IRA.10Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions A 45-year-old who leaves government service can begin withdrawals immediately, paying only ordinary income tax on the amount received. If you rolled a 401(k) balance into your 457(b) and later withdraw those specific dollars before 59½, the 10% penalty still applies to that portion.
Unforeseeable Emergencies
If you are still employed and under 70½, the only route to your account is an unforeseeable emergency withdrawal. The standard is strict. The need has to arise from a sudden illness or accident affecting you, your spouse, or a dependent, or from a casualty loss or other extraordinary event outside your control. The plan can only pay out enough to cover the emergency plus taxes on the distribution, and you must first use other resources available to you, including insurance and any plan loans your plan offers.
Required Minimum Distributions
Like other tax-deferred retirement accounts, 457(b) plans are subject to required minimum distributions. Most participants must begin RMDs by April 1 of the year after they turn 73.11Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Under SECURE 2.0, this age rises to 75 in 2033 for individuals born in 1960 or later.
Loans
Governmental 457(b) plans may offer participant loans, though they are not required to. When loans are available, the maximum is the lesser of $50,000 or the greater of $10,000 and half your vested account balance.12Internal Revenue Service. Retirement Plans FAQs Regarding Loans You repay in substantially equal installments over no more than five years, with payments due at least quarterly. Loans used to buy a primary residence can run longer.
Non-governmental 457(b) plans cannot offer loans at all. Any loan from a non-governmental plan is treated as a taxable distribution to the participant.2Internal Revenue Service. Non-Governmental 457(b) Deferred Compensation Plans
Rollovers and Portability
Governmental 457(b) balances have broad rollover options. You can move funds into a traditional IRA, a 401(k), a 403(b), or another governmental 457(b).13Internal Revenue Service. Rollover Chart A direct rollover avoids the mandatory 20% federal income tax withholding that applies when the plan cuts you a check. One trade-off to watch: money that started in a 457(b) and rolls into a 401(k) or IRA loses the penalty-free early withdrawal treatment if you tap it before 59½.
Non-governmental 457(b) balances are far less portable. They can only move into another eligible non-governmental 457(b), and only if the receiving plan agrees to accept them. Rolling into an IRA, 401(k), or 403(b) is not allowed. If your next employer does not sponsor a non-governmental 457(b), your options are to leave the money where it is or take a taxable distribution.
457(b) Is Not 457(f)
The 457(b) and 457(f) labels sound similar and describe very different arrangements. In a 457(b), your deferred salary stays out of taxable income until you actually receive distributions.14Internal Revenue Service. Issue Snapshot – 457(b) Plan of Tax Exempt Entity – Tax Consequences of Noncompliance
A 457(f) plan, sometimes called an ineligible plan, works differently. Deferred compensation becomes taxable as soon as there is no longer a substantial risk of forfeiture, meaning the moment your right to the money vests, you owe income tax on it, whether or not you have received a dollar.14Internal Revenue Service. Issue Snapshot – 457(b) Plan of Tax Exempt Entity – Tax Consequences of Noncompliance A 457(f) plan also has no annual contribution cap, which is why organizations sometimes use them to recruit senior executives, with vesting schedules acting as retention tools. If your employer offers deferred compensation and you are not sure which section governs it, ask before you sign. The tax consequences of confusing the two can be steep.