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Section 457 Plan Contribution Limits for 2009, 2008 - 2005

The contribution retirement plans described in IRC section 457 are available for certain governmental and non-governmental employers in the US.

These plans can be either eligible under 457(b) or ineligible under IRC 457(f). With 457(b) plans employees are allowed to defer compensation into their plan on a pre-tax basis.

Basically, the features of 457 plans are very similar to the 401(k) or 403(b) plans. The key difference is that there is no 10% penalty for earlier withdrawal (before 59 1/2 years of age). However, such withdrawals are subject to ordinary income taxation.

Section 457 Plan Limits
Year AGE 49 & BELOW AGE 50 & ABOVE
2005 $14,000 $18,000
2006 $15,000 $20,000
2007 $15,500 $20,500
2008 $15,500 $20,500
2009 Indexed to inflation Indexed to inflation

You can contribute both to a Section 457 retirement plan and a 401(k) plan. In fact, many large government employers offer both 401(k) and 457 plans to their employees which allows them to "supercharge" their savings for retirement.

Two types of catch-up provisions are possible with 457 plans. The first type allows for additional $5,000 that can be contributed for people above 50 (as showed in the table above). The second type is available only for governmental 457 plans and employees who are within 3 years of normal retirement age and amounts to a full employee deferral limit.

For example, if you are over 50 years of age and within 3 years of retirement, and have both a 457 and a 401k plan, in 2008 you could defer a total of $51,500 into your retirement plans.

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