What is a 457(b) Plan?

The city of Phoenix offers a tax-exempt savings benefit known as a governmental 457(b) Deferred Compensation Plan.

These plans accept payroll-deducted contributions for participant-directed investing and are intended to help public employees like you meet long-term objectives, such as generating retirement income. Your contribution election can be either a percentage of your pay or a flat dollar amount. Check out this article for answers to some frequently asked questions about deferred comp plans. The city of Phoenix also offers a 401(a) Defined Contribution Plan. However, that Plan does have a limited enrollment period (PDF).

How does the 457(b) Plan work?

If you participate in the city's 457(b) Plan, you contribute salary reductions – or "deferrals" – which are placed in a participant-directed account. Contributions are limited to an annual maximum dollar amount, as established under the Internal Revenue Code (IRC).

Once in your account, you have to decide where you want to invest your contributions from investment options in the Plan which were selected by the city of Phoenix Deferred Compensation Board, the Plan sponsor. Investing involves market risk, including possible loss of principal. As you get started in the Plan, we’ll help you understand market risk and strategies that may help you deal with it.

Learn more about the three steps to participating in the city's 457(b) and/or 401(a) Plan.

Why should you participate in the city’s 457(b) Plan?

You may get significant advantages if you participate in the 457(b) Plan:

  • Your contributions and any earnings to the 457(b) Plan are tax-deferred which means you do not pay income taxes on contributions or earnings related to the plan until you retire and begin to take withdrawals from your 457(b)/401(a) Plan’s account.
  • Your money has the chance to potentially grow with the power of time and compounding
  • You may be eligible to take a tax credit (Saver's Credit) for elective deferrals contributed to your account
  • You may take an unforeseeable emergency withdrawal, as long as certain qualifications are met
  • You may become eligible for a loan at competitive rates

You will pay ordinary income tax when and as you withdraw from your account.

Get the help you need

Talk with a Plan Service Representative if you have questions about the city’s 457(b) Plans or plan participation. Information provided by Plan Service Representatives is for educational purposes only and is not intended as tax or investment advice. Note: Plan Service Representatives may also be referred to as “Retirement Specialists” elsewhere on this website.

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