Introduction

Attracting and retaining dedicated professionals can be a challenge for public agencies and nonprofit organizations that often compete with the private sector for talent. A 457(b) retirement plan provides a meaningful way to bridge that gap—offering a tax-advantaged savings option that supports employees’ financial security while reinforcing your organization’s long-term commitment to its team.

Beyond its role as a savings vehicle, a 457(b) plan reflects thoughtful leadership: it demonstrates that your organization values financial well-being and wants to provide the flexibility employees need as they plan for retirement.

Benefits for Employers

Attract and retain key talent
A 457(b) plan can be a differentiator for public and nonprofit employers seeking to reward and retain experienced staff or senior leadership. By offering access to an additional retirement savings option, you help strengthen employee loyalty and position your organization as a long-term career destination.

Flexible plan design
Unlike other types of retirement plans, a 457(b) allows participants to make withdrawals without a 10% early withdrawal penalty before age 59½. This flexibility can be valuable for employees who may transition careers, retire early, or require access to funds under specific circumstances.

High contribution and catch-up opportunities
In 2024, participants can contribute up to $23,000 per year, with an additional $7,500 catch-up contribution for those age 50 or older. In the final three years before retirement, participants may qualify for a “special catch-up” provision—doubling their annual contribution limit and allowing them to accelerate savings during the final phase of their career.

Tax-deferred growth
Contributions reduce taxable income in the year they are made, and investment earnings grow tax-deferred until withdrawal. This structure allows funds to compound more efficiently over time.

Employer contributions
Depending on plan design, employers may offer matching or non-elective contributions, further enhancing the value of the benefit and supporting employee retirement readiness.

Portability between organizations
If employees move between eligible public or nonprofit employers, they can roll their balance into another 457(b) plan or other qualified account—maintaining the benefit of tax-deferred savings.

Benefits for Employees

Additional savings opportunity
For employees already contributing to another retirement plan, a 457(b) provides an extra avenue to save—particularly valuable for senior leaders or long-serving employees who want to build greater retirement flexibility.

Penalty-free early withdrawals
The absence of the 10% early withdrawal penalty allows for greater accessibility if employees need to draw funds before traditional retirement age.

Flexible payout options
At retirement or separation, participants can choose lump-sum distributions, periodic withdrawals, or annuity payments—creating more control over their retirement income strategy.

Conclusion

A 457(b) plan allows public and nonprofit organizations to offer more than a benefit—it’s a statement of long-term commitment to employee well-being. With its flexible structure, high contribution limits, and tax advantages, a 457(b) plan helps strengthen your organization’s ability to attract and retain talent while supporting your mission and workforce stability.

Interested in learning how a 457(b) plan could benefit your organization and your team? Connect with Midland RPS today to learn more.