457 Plan – A non-qualified, deferred compensation plan. Employer-sponsored retirement savings plan, usually offered by municipalities and governmental entities, which allow employees to defer a portion of their current compensation for payment at a later date, generally retirement. Salary deferrals (or contributions) are voluntary, and are made through the ease of payroll deduction. Under this plan, contributions and earnings accumulate tax-deferred and withdrawals are taxed as ordinary income. This plan offers an important supplement to pension plans and/or Social Security.
401(a) Plan - A money-purchase retirement savings plan that is set up by an employer. The 401(a) plan allows for contributions by the employee, the employer, or both. Contribution amounts, whether dollar-based or percentage-based, eligibility, and vesting schedule are all determined by the sponsoring employer. Funds are withdrawn from a 401(a) plan through lump-sum payment, rollovers to another qualified plan, or through an annuity. A 401(a) plan does not affect a participant’s 457 Deferred Compensation plan or the amounts that can be contributed to it.