ACCG Retirement Services: 457(b) Roth Deferred Compensation Plan
A Roth Contribution Account under a 457(b) Deferred Compensation Plan holds after-tax contribution plus earnings in a subaccount under the Plan. It allows employees to make after-tax contributions to the 457 Plan and under certain circumstances, to receive the accumulated earnings tax-free.
- 100% immediate account ownership
- Tax-deferred investment returns
- Holds after-tax contributions plus earnings
- Contributions are made through payroll deductions
Roth 457 contributions, combined with pre-tax 457 contributions, can be made up to 457 IRS Plan limits. Participants choose how to allocate their contributions in whole percentages between pre-tax 457 and Roth 457 contributions. For example, a participant could split a 15% total 457 contribution by putting 9% in pre-tax and designating 6% as Roth. Participants may change how they split their 457 contributions at any time, but once a 457 contribution is made, it cannot be re-classified.
Accessing Funds after Employment Termination
When a Roth 457 distribution is available, it must meet two requirements to be considered qualified. The first is that the distribution must be made after attainment of age 59½, death or disability. The second is that your first Roth 457 contribution must have been made to the Plan at least five years before the distribution. The qualifying period starts at the beginning of the year the first Roth 457 contribution is made and is met on the fifth anniversary of that date. For example, a participant made his or her first Roth 457 contribution on September 15, 2023. The first tax year would start on January 1, 2023. The five-year requirement would be met on January 1, 2028.
If the distribution is not qualified, the portion attributed to the Roth 457 contributions is not subject to applicable income taxes since it was already taxed when it was made. The earnings portion of the distribution would be taxable on a pro-rata basis. For example, if 25% of the Roth account value was due to earnings, 25% of any distribution would be considered taxable.
Rules regarding distributions
Roth 457 contributions and pre-tax 457 contributions are subject to the same Plan distribution rules requiring termination of employment. Required Minimum Distributions (RMDs) apply to both pre-tax and Roth subaccounts but the participant may choose to take the distributions from either or both sources. As of September 1, 2023, Unforeseen Emergency withdrawals, are allowed to be withdrawn from your Roth 457 subaccount.
Designating Beneficiaries In Case of Death
Employees will need to designate a beneficiary, or beneficiaries, so that their account balance will be paid to the designated individuals in the case of death. Beneficiaries are strongly encouraged to contact ACCG Retirement Services representatives for a complete description of options.