Philly457 is a type of deferred compensation plan that allows employees to set aside a portion of their income on a pre-tax basis, which can then be used to supplement their retirement income. The plan is named after the section of the Internal Revenue Code that governs it, Section 457.
Key Features of Philly457
The Philly457 plan has several key features that make it an attractive option for employees looking to save for retirement. Pre-tax contributions are made to the plan, which reduces the employee’s taxable income for the year. The funds in the plan are then invested and grow tax-deferred, meaning that the employee will not have to pay taxes on the investment earnings until they withdraw the funds in retirement. Deferred compensation plans like Philly457 are often used by public sector employees, such as those working for state and local governments, as well as by certain tax-exempt organizations.
Eligibility and Contribution Limits
To be eligible to participate in a Philly457 plan, an employee must be employed by a qualified employer, such as a state or local government or a tax-exempt organization. The employee must also meet certain age and service requirements, which vary depending on the employer and the plan. In terms of contribution limits, the annual contribution limit for Philly457 plans is 19,500 in 2022, although this limit may be adjusted for inflation in future years. Employees who are age 50 or older may also be eligible to make <strong>catch-up contributions</strong> of up to 6,500 in 2022.
| Contribution Type | 2022 Limit |
|---|---|
| Annual Contribution | $19,500 |
| Catch-up Contribution | $6,500 |
Investment Options and Fees
Philly457 plans often offer a range of investment options, including mutual funds, annuities, and other investment vehicles. The specific investment options available will depend on the plan and the employer. Employees should carefully review the fees and expenses associated with each investment option, as these can impact the overall return on their investment. In general, it’s a good idea to diversify your investments to minimize risk and maximize returns.
Loan Provisions and Withdrawal Rules
Some Philly457 plans may offer loan provisions, which allow employees to borrow money from their account balance. However, these loans are subject to certain rules and restrictions, and employees should carefully review the terms and conditions before borrowing from their plan. In terms of withdrawal rules, employees may be able to withdraw funds from their plan upon separation from service, retirement, or attainment of age 59 1⁄2. However, employees should be aware of the potential tax implications of withdrawing funds from their plan, as these may impact their overall tax liability.
What are the benefits of participating in a Philly457 plan?
+The benefits of participating in a Philly457 plan include the ability to make pre-tax contributions, which can reduce your taxable income for the year. The funds in the plan also grow tax-deferred, meaning that you will not have to pay taxes on the investment earnings until you withdraw the funds in retirement. Additionally, Philly457 plans often offer a range of investment options, which can help you to diversify your portfolio and minimize risk.
In conclusion, Philly457 plans can be a valuable tool for employees looking to save for retirement. By understanding the key features, eligibility requirements, and investment options available, employees can make informed decisions about their retirement savings and take steps to secure their financial future.
