The 457(b) retirement plan is funded by the employer and it is also a tax-deferred retirement plan. The name “457(b)” originates from the section that governs these plans in the Internal Revenue Code. It can also be called the “457 plan.” Returns are being deducted from the paychecks of the 457(b) retirement plan subscribers to be set aside in an investment account that is tax-free as this is the case for all defined contribution plan.

The 457(b) plan was established purposely for government employers and non-government employers like hospitals and charities. Its main aim was to serve as an alternative defined contribution plan. However, there are specific rules which differentiate the governmental and non-governmental 457 plans.

One difference that is imperative is the fact that public government 457s have to be funded by the employer, on the other hand, nearly all non-governmental 457s are not funded by employers (as this will mean that tax benefits will be removed the account, according to the guidelines of the ERISA).

Federal employees or members of the armed services are the only ones that are exclusively entitled to establish such a plan. There are three parts of the FERS retirement packages among which the Thrift Savings Plan is, including the FERS annuities and Social Security. The Thrift Savings Plan was created by Congress as an alternative to the 401(k) plan for public workers.

This plan consists of about ten investment funds, under six categories called the G, F, C, S, I and L. Every one of these is basically a mutual fund portfolio organized based on the different level of risks attached to each. You are not entitled to hold individual securities through the Thrift Savings Plan.

It was the first employer-sponsored retirement vehicle that was created as part of the Economic Growth and Tax Relief Reconciliation Act of 2001. Its rules and conditions are somewhat similar to that of a normal plan, except that the employer/owner and his business are not subject to the complex and costly guidelines of the Employee Retirement Income Security Act (ERISA) and there can be no other employees of the company who are considered full-time (1,000+ hours worked per year).