In retirement terminology, the term 457 Plan refers to a United States retirement plan which meets the requirements of the Internal Revenue Code or IRCís Section 457. This section of the IRC defines and details the qualification rules for 457 trusts and plans. The 457 Plan is much like a 401(k) Plan, except that it is offered to the employees of state and federal governments and agencies.
For example, if you were working for the federal or state government in the United States, you would not have the option of getting a 401(k) plan from your government employer to put away money for your retirement and defer taxes. Nevertheless, a 457 Plan, which is roughly the equivalent, is available with the difference that the employer never deposits matching funds into the account and the funds cannot be transferred to an Individual Retirement Account or IRA. Benefits are normally paid out at retirement but can also be disbursed under special circumstances and upon leaving the job. Benefits are available as annuities or annual installments, or they can be taken out in a lump sum. All of the usual IRS taxes and early withdrawal penalties apply.