457(b)

    A 457(b) plan is a non-qualified tax-deferred compensation plan that works very much like other retirement plans such as the 403(b) and 401(k). Created in 1978, the name refers to the relevant section 457(b) in the Internal Revenue Code that governs the plan. Two main types of 457(b) plans exist: governmental and tax-exempt.

• Public plans - State and local goverment plans
  Local and state governments are eligible to establish a 457(b) plan for their employees of a state, a political subdivision of a state or any agency or instrumentality of a state. These types of employees can include: local and state government workers, fire fighters, police personnel, and public school employees.
  
  
• Private plans - Non-governmental tax-exempt entity plans
  Tax-exempt organizations that are non-governmental (hospitals, charitable organizations, unions, among others) must generally limit participation to a selected group of management or highly compensated (also known as "top hat") employees. This is due to the rules under Title I of the Employee Retirement Income Security Act of 1974 (ERISA). ERISA generally requires that a private retirement plan providing benefits to employees be funded by a trust or annuity contract. The rules, however, require that private 457(b) plans be unfunded in order to obtain tax benefits. Therefore, a plan will violate ERISA unless an employer limits participation to a select group of management or highly compensated employees (or "top hat group") then it is exempt from most ERISA requirements.