Your Contributions
Your 457(b) Savings Plan contributions will be automatically deducted from your gross pay before any federal — and in most cases, state and local — income taxes are deducted. This reduces your taxable income, which means you pay less income tax each year. You should consult with a tax professional to learn more about how your contributions may be taxed at the state or local level.
The Plan offers a wide range of professionally managed investment options, including the Vanguard Target Retirement Funds administered through Fidelity Investments (Fidelity).
Both your pre-tax contributions and any investment earnings on this money grow tax deferred while in the Boston University 457(b) Savings Plan. Upon termination of your Boston University employment, you will pay taxes on this money and any investment earnings when you receive a distribution. Ordinary income tax rates will apply. Capital gains treatment is not available for distributions from this type of Plan.
Keep in mind that even though your pay is reduced for federal income taxes, it is not reduced for purposes of Social Security. In other words, you pay the same amount in Social Security taxes, and receive the same Social Security benefit, regardless of your participation in the 457(b) Savings Plan.
The 457(b) Savings Plan provides additional voluntary tax deferred savings, similar to what is available in the Boston University Supplemental Retirement and Savings Plan. Your savings grow through pre-tax contributions you make from your pay, plus any investment earnings on those contributions.
You are always 100% vested in your own contributions to the 457(b) Savings Plan.
Contribution Limits
- When you join the 457(b) Savings Plan, you decide how much of your eligible pay you wish to contribute on a pre-tax basis. Each calendar year, you may contribute any dollar amount of your eligible pay. Your contributions are limited to an amount determined annually by the IRS. The 2023 limit is $22,500.
- If you wish to contribute the annual maximum, you choose how and when to reach that maximum. This means you may contribute the entire amount in one semi-monthly pay cycle, or you may choose to reach the maximum over the year. If you reach the annual maximum before the end of the year, your contributions will automatically stop for the rest of the year.
- You may not make catch-up contributions based on age to your 457(b) Savings Plan.
- Only pre-tax contributions are permitted. IRS rules do not allow Roth after-tax contributions.
Pre-Tax Status
- Your 457(b) Savings Plan contributions will be automatically deducted from your gross pay before any federal — and in most cases, state and local — income taxes are deducted. This reduces your taxable income, which means you pay less income tax each year. You should consult with a tax professional to learn more about how your contributions may be taxed at the state or local level.
- Both your pre-tax contributions and any investment earnings on this money grow tax deferred while in the Boston University 457(b) Savings Plan. Upon termination of your Boston University employment, you will pay taxes on this money and any investment earnings when you receive a distribution. Ordinary income tax rates will apply. Capital gains treatment is not available for distributions from this type of Plan.
- Keep in mind that even though your pay is reduced for federal income taxes, it is not reduced for purposes of Social Security. In other words, you pay the same amount in Social Security taxes, and receive the same Social Security benefit, regardless of your participation in the 457(b) Savings Plan.
- Your Boston University 457(b) Savings Plan contributions will be in addition to any contributions you make to the Boston University Retirement Plan and the Boston University Supplemental Retirement and Savings Plan. Eligible faculty and staff can contribute up to the IRS maximum ($22,500) to both Boston University Retirement Plan and Supplemental Retirement and Savings Plan as well as the 457(b) Savings Plan. In other words, you can contribute the IRS maximum to the Boston University Retirement Plan and Supplemental Retirement and Savings Plan, plus the IRS maximum to the 457(b) Savings Plan, for a total annual contribution of $45,000 if you are under the age of 50 or $52,500 if you are age 50 or older.
