The 457(b) Deferred Compensation Plan allows you to save for retirement like the 403(b) SRA but has fewer options to take a cash withdrawal while you are still employed with U-M. You contribute a fixed dollar amount with each paycheck; there is no university contribution.
You may enroll in the 457(b) plan without being enrolled in the Basic Retirement Plan or the 403(b) SRA. You also do not have to wait to enroll in the 457(b) until after you contribute the maximum to the 403(b) SRA.
The 457(b) is a good option if you do not need to take a cash withdrawal from the plan before you retire, terminate employment, or reach age 70½. It can be a good option if you contribute the maximum to the 403(b) SRA or have another retirement plan but still want to save more.
Type of Plan
The U-M 457(b) is a governmental deferred compensation plan. You have two options for the type of contributions you make to the plan, which determine whether you pay income tax on contributions to the plan or on distributions from the plan at a later date:
- Tax-deferred contributions with income tax due upon distribution
- After-tax Roth contributions with tax-free qualified distributions
The following groups are eligible to enroll in the 457(b) Deferred Compensation Plan:
- All regular, active faculty or staff members (including Supplemental Instructional staff), House Officers, Research Fellows, Professional Specialists, GSIs, GSSAs, and GSRAs) with a 1% or greater appointment of at least four months duration paid by the university
- Rehired retirees with funding and effort (including emeritus titles)
You must receive earned compensation reportable on a W-2 and subject to federal, state, and FICA tax to be eligible. Stipend and fellowship funding are not eligible to be contributed.
You may invest your funds with two investment companies — TIAA-CREF and Fidelity. Contributions may be allocated to either or both, and contributions may be distributed among the approved investment funds offered.
If you choose to make after-tax Roth contributions, TIAA-CREF and Fidelity Investments will track your after-tax contributions and associated earnings separately within your existing U-M account(s). You will not have separate accounts for your Roth contributions.
Transfers for Purchase of Service Credit
If you participate in a defined benefit governmental plan (as defined in Internal Revenue Code Section 414(d)), you may request a direct transfer from this plan to the defined benefit governmental plan if the transferred assets are used for the following purposes:
- The purchase of service credit (as defined in Code Section 415(n)(3)(A)) under the defined benefit governmental plan; or
- The repayment of contributions and earnings related to a previous forfeiture of service credit under the defined benefit governmental plan.