| U.S. employees of government agencies and | | | | 2006 figure will increase each year by $500 to adjust |
| organizations and tax exempt organizations should | | | | for increases in cost of living. |
| know about tax code section 457 when planning their | | | | Only certain eligible employers are allowed to set up a |
| retirement. This section of the Internal Revenue | | | | section 457 plan. These are defined by the IRS as |
| Service (IRS) tax code governs the compensation | | | | states and their subdivisions, instruments or political |
| plans that are deferred and non-qualified for those | | | | subdivisions of the states, and any entity that is not |
| employees of governments and tax-exempt | | | | a unit of the government but is exempt from federal |
| institutions other than churches. The pension plan that | | | | income tax. The latter includes religious and charitable |
| has been created for the retirement of these folks | | | | organizations, educational institutions and |
| has been named the Section 457 plan. These | | | | organizations, private hospitals, labor unions and trade |
| employees can defer part of their compensation | | | | associations, private foundations, farming |
| pre-taxed through deductions from their payroll. This | | | | cooperatives and fraternal orders. |
| defers both state and federal taxes until these | | | | A section 457 plan will not pay out for retirement |
| retirement assets start being withdrawn. | | | | before the calendar year in which the participant |
| Such eligible retirement plans have monetary ceilings | | | | reaches age 70 ½ and has severed |
| on the amounts that can be deferred. The amount | | | | employment with the participating firm. A severe |
| that is deferred in this way for retirement cannot be | | | | financial hardship, unexpected illness or injury due to |
| more than either 100 percent of the employee's pay | | | | accident or other unforeseen emergency can allow |
| or $15,000 - whichever is the lesser. This $15,000 | | | | for withdrawal from the retirement plan as well. |