457 Participant Contributions

When you enroll in the Wyoming Retirement System (WRS), 457 Deferred Compensation Plan (457), you decide how much to set aside from each paycheck. To be in the plan, you must contribute at least $20, but you can contribute any dollar amount up to the IRS Annual Plan Contribution limit. You also decide whether to contribute to the 457 Plan before or after federal taxes are taken out, or a combination of both. Annual limits vary based on the age of the participants and the IRS contribution limits.

If you elect to contribute to the Plan before-tax, payroll deductions taken each pay period will be taken before federal income taxes are calculated. Your actual reduction in take-home pay is less your contribution. If your employer contributes to the 457 Plan, these contributions must always be before-tax and will be taxed upon distribution.

If you elect to contribute after-tax, federal income taxes are calculated before payroll deductions are taken each pay period. In other words, your contribution amount does not reduce the federal income taxes withheld from your pay.

Distributions for before-tax and after-tax amounts are treated differently for tax purposes. Before-tax contributions and growth are not taxed, but upon distribution they are subject to ordinary income taxes. After-tax contributions and growth with “qualified distributions” are not taxed. A qualified distribution for after-tax accounts means the participant has severed from employment and, in addition, has held the account for at least five calendar years, and is at least age 59 ½. If the participant has severed employment but does not meet the other two requirements, distributions of investment earnings will be taxable.

You may increase, decrease, stop, or restart your contributions at any time. However, your payroll office must receive your change request prior to your payroll run date in order to take effect for the next payroll.

If your employer automatically enrolls new hires, you can make changes to your elections online when logged into your account with your username and password. Otherwise, you submit a form to your payroll contact to make changes.

The WRS 457 Plan is different from a regular savings account. While you can stop contributing any time, you can only withdraw money from it if you end employment, are 73, or are approved for an unforeseeable financial emergency as defined by the IRS.  In the event of your death, your beneficiary(ies) are eligible to withdraw the funds. There are no loan provisions.

People closer to retirement can contribute more. If you are within three years of normal retirement age, there’s good news! You may be able to take advantage of additional contributions. This is known as a “Special Catch-Up.” You may also contribute higher annual amounts once you reach the age of 50. If you are interested, call the WRS Deferred Compensation Team at 307-777-3325.