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Deferred Compensation 457 Plan

The State of Illinois 457 Plan is a Section 457(b) supplemental deferred compensation plan that provides a tax-favored vehicle for participants to save for retirement. Deferred compensation contributions and earnings are completely exempt from Illinois state income tax, even at the time of distribution, if taken in accordance with plan provisions, at full retirement age, and while a legal resident of the State of Illinois.

457(b) Plan in Brief:

  • Participation in the State of Illinois Deferred Compensation 457 plan is supplemental to your participation in the State Universities Retirement System (SURS) and is strictly voluntary.
  • A flat dollar amount, that you determine, is deducted from your paycheck on a pre-tax basis. The amount of income that can be tax deferred is subject to IRS limitations.
  • Both Federal and State income taxes are deferred on your deposits and interest/accumulation until you withdraw funds from your retirement account.
  • Once distributions begin, the distributed monies are fully taxable as ordinary income for federal tax purposes. The distributions are not taxed by the State of Illinois, if taken in accordance with plan provisions, at full retirement age, and while a legal resident of the State of Illinois.
  • Your participation in the State of Illinois 457 plan does not reduce any of your University benefits based on full salary such as retirement, life insurance, disability or survivor benefits.
  • You may begin participation in the State of Illinois Deferred Compensation 457 Plan at any time.

To be eligible to participate in the State of Illinois Deferred Compensation 457 Plan, you must be an active employee and currently receiving compensation from the University. Contributions will be deducted from your paycheck while the plan is effective. Note: You do not need to be eligible for insurance benefits to participate in the 457(b) Plan.

Why Participate?
Many people look to personal savings and investments to potentially enhance their retirement income. Participating in the State of Illinois Deferred Compensation 457 Plan gives you the opportunity to accumulate additional retirement savings with certain tax advantages. Your deposits to the 457 plan are not subject to Federal and State taxes at the time of deposit, and earnings on these deposits are deferred from taxes, until withdrawn. Because you pay Federal taxes on your investments during your retirement years, when income is presumed to be lower, you may be able to accumulate more wealth by saving on a pre-tax rather than an after-tax basis. Also, qualified distributions, if taken in accordance with plan provisions, at full retirement age, and while a legal resident of the State of Illinois are not subject to Illinois state taxes. For further information on the taxation of 457(b) distributions, please visit the State Taxation of Retirement Income page.

Minimum Annual Contribution
The minimum contribution is $10 per pay period or $20 per month, whichever is greater. Your contribution is a flat dollar amount.

Maximum Annual Contribution
The maximum contribution limit is 100% of your net "includable compensation" or the annual limit set by the IRS, whichever is less. Includable compensation is defined as the employee's compensation minus any pre-tax contribution to a state sponsored retirement plan. Generally, employee contributions are limited to 80% of pay to allow for the usual payroll deductions. Exceptions may be made in certain circumstances. Benefits counselors are available at your UPB Benefits Services office to review employee deductions to make this determination.

Maximum contribution limits are established by the IRS each year. For current year information, refer to the CMS Deferred Compensation Plan web page.

Catch-Up Provisions

In the State of Illinois Deferred Compensation 457 Plan, there are also two options for "catch-up" as you near retirement.
  1. Employees who are age 50 and over may make contributions with a higher annual limit.
  2. Employees may contribute twice the normal limit for any or all of the last three years prior to normal retirement age.

Contact T. Rowe Price for catch-up provision details at 888-457-5770.

Contact CMS Deferred Compensation office or T. Rowe Price for questions about the plan or the funds offered.

CMS Deferred Compensation
217-782-7006 (Voice)
800-442-1300 (Toll Free)
217-785-3979 (TDD)

T. Rowe Price
888-457-5770 (Toll Free)

More Information and How to Enroll
How to Enroll
CMS Deferred Compensation Plan website
Deferred Compensation Plan Booklet
Summary Plan Description
403(b) and 457 Comparison Chart
Withdrawing Funds Early or Taking a Loan from a Supplemental Retirement Account
State Taxation of Retirement Income

This information is provided with the understanding that it is a source of information and does not constitute legal, tax, or other professional advice. If legal advice or other professional assistance is required, the services of a professional advisor should be sought.

Maintained by University Human Resources | Contact Information | Last Update: 01-August-2014 | ID: 135