What is a 457(b) deferred compensation plan?

governmental 457(b) deferred compensation plan, like Ohio DC, is a voluntary retirement savings plan that allows participants to supplement any existing retirement/pension benefit by saving and investing payroll contributions. Ohio DC participants can choose to make pre-tax payroll contributions or, if offered by their employer, post-tax contributions to the Roth 457(b) option. The number 457 refers to the section of the Internal Revenue Code that establishes deferred compensation plan rules for governmental employers.

With the pre-tax 457(b) plan, you can put some of your taxes on hold by reducing the amount of taxes withheld from your pay. Contributions and any earnings are tax-deferred (both federal and state income taxes) until money is withdrawn. Withdrawals are taxed as ordinary income.  

With the Roth 457(b) option, contributions are not tax deductible, but withdrawals are tax-free after certain conditions are met. Deciding whether to make Roth contributions will depend on individual financial circumstances, such as current income and anticipated income in retirement, and current and future tax rates. To determine if Roth contributions are right for you, consult a tax advisor to assist you. For additional information, review the Ohio DC Roth Contributions brochure.

Please keep in mind that due to IRS regulations, you normally cannot withdraw your retirement savings from Ohio DC until you have terminated employment or qualify for an unforeseeable emergency.


Information provided by Retirement Planning Specialists and Account Executives is for educational purposes only and is not intended as investment advice.

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