Deferred Compensation
What is a 401(k) plan? A 401(k) plan is a retirement savings plan designed to allow eligible employees to supplement any existing retirement and pension benefits by saving and investing your taxadvantaged dollars through voluntary salary deferral. You may select from pre-tax and after-tax (Roth 401(k)) deferral options. Pre-tax contributions and any earnings on contributions are tax-deferred until money is withdrawn. Distributions are usually taken during retirement, when many participants are typically receiving less income and may be in a lower income tax bracket than while working. Distributions from pre-tax contributions are subject to ordinary income tax. If taken before you reach age 59½, distributions may be subject to an additional 10% federal early withdrawal tax.
What is a Roth 401(k) contribution? A Roth 401(k) contribution is an option under the 401(k) plan that allows eligible employees to supplement any existing retirement and pension benefits by saving and investing after-tax dollars through voluntary salary deferral. Contributions and any potential earnings can be distributed on a tax-free basis after you have reached age 59½ and after the required five-year holding period has passed. You have to designate all or a portion of your 401(k) elective deferrals as Roth contributions.
Log into your 401(k) account now at RetireReadyTN.gov.
The 2024 maximum contribution limit is $23,000. The catch-up contribution is an additional $7,500. This maximum contribution limit is an aggregate total of the 401(k) and 403(b).
What is a 457 deferred compensation plan? A governmental 457(b) deferred compensation plan (457 plan1 ) is a retirement savings plan that allows eligible employees to supplement any existing retirement and pension benefits by saving and investing pre-tax dollars through a voluntary salary contribution. Contributions and any earnings on contributions are taxdeferred until money is withdrawn. Distributions are usually taken during retirement, when many participants typically receive less income and may be in a lower income tax bracket than while working. Distributions are subject to ordinary income tax. The early withdrawal penalty does not apply to 457 plan withdrawals. The 457 deferred compensation plan does not offer a Roth option.
Log into your 457(b) account now at RetireReadyTN.gov.
The 2024 maximum contribution limit is $23,000. The catch-up contribution is an additional $7,500.
What is a 403(b) plan? The 401(k) and 403(b) are very similar in design. Both are deferred compensation plans with immediate vesting. The main difference is the financial institutions that participate in the plans. Empower is the only provider in the 401(k), whereas the 403(b) has the two ORP providers. Therefore, an employee could elect to contribute supplemental/voluntary funds to the same financial institution that they selected for the ORP, should they participate in ORP.
To make changes to your 403(b) account, complete a 403(b) contribution form or 403(b) termination form and return it to the Benefits office.
The 2024 maximum contribution limit is $23,000. The catch-up contribution is an additional $7,500. This maximum contribution limit is an aggregate total of the 401(k) and 403(b).
A chart displaying the differences between the 403(b) and 401(k) is below:
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|
403(b) |
401(k) |
|
Providers |
TIAA & VOYA |
Empower |
|
Eligibility |
All active higher education employees |
All active state employees |
|
Contribution Source |
Employee deferrals |
Employer and Employee deferrals |
|
Investments |
Investments are self-directed |
Investments are self-directed |
|
Distribution Options |
Based on the individual’s account balance. Individuals are eligible to select: single life annuity, joint and survivor annuity, lump sum payments, periodic payments, and required minimum distribution payments, among others |
Based on the individual’s account balance. Individuals are eligible to select: lump sum payments, periodic payments, and required minimum distribution payments, among others |
|
Vesting |
100% immediate |
100% immediate |