Supplemental Retirement Plans
Texa$aver Plans 457 and 401(k)
Remember, the contributions to your Texa$aver account provides a tax savings now and gives you a head start on retirement. These are the major differences between the two accounts:
- State agency employees can enroll in both the Texa$aver 401(k) and 457 Plans. The 457 Plan is available to employees of four-year higher education institutions and community colleges that choose to offer it.
- With the 401(k), you specify a percentage that will come out of your paycheck each month; with the 457, you specify a dollar amount.
- If you withdraw money from your account before age 59 1/2, you will pay 20% income tax. There will be an additional tax penalty of 10% for the 401(k) when you file your tax return, but not for the 457.
- The 457 Plan has a three-year Catch-up provision that is not available in the 401(k) Plan.
The 401(k) and 457 plan contribution maximums are $17,500 for each plan. Therefore, those participating in both plans can contribute a maximum of $34,000.
- Age 50 and Over additional contributions: maximums for each plan (401(k) and 457) are $23,000.*
- Special 457 Catch-up contributions: maximum contribution is $34,000 (subject to the total dollars available from prior unutilized contributions).*
*The Age 50 and Over additional contribution of $5,500 to the 457 plan and the Special 457 Catch-up contribution cannot be used at the same time.
The minimum you can contribute to the 401(k) is 1% of your gross pay each month. The minimum you can contribute to the 457 is $20 per month.
As a State employee hired on or after January 1, 2008, you are automatically enrolled in the Texa$aver 401K Plan at 1% of your monthly compensation into a Wells Fargo Advantage Target Date Fund selected for you based on your current age. Return to work retirees at a state agency are not eligible for the automatic enrollment but can enroll any time.
Age 50+ Catch-up Provision
Employees over the age of 50 may be eligible to defer amounts in excess of the maximum described above to both the 401(k) and 457 plans under the Age 50+ Catch-up Provision. Those over the age of 50 may defer additional $5,500 to each plan.
Three-Year Catch-up Provision
Employees within three years of eligibility for retirement may be eligible to defer amounts in excess of the maximum described above to the 457 plan under the Three-Year Catch-up Provision.
Employees cannot participate in the Three-Year 457 Catch-up Provision if participating in the Age 50 and Over Catch-up Provision in the 457 Plan.