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Subject:  Re: 401k vs. 457 Date:  5/21/2002  12:59 PM
Author:  TMFPixy Number:  34579 of 103300

Moiless writes:

When I ask for disadvantages between the plans, what I am asking for are the little details many people fail to ask about. Specifically, are there any legal protections (i.e. bankruptcy, divorce, legal judgments) that make one plan better than the other?

Since the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), there is little difference between the two (i.e, 457 vis a vis 401(k)). Still, non-governmental 457 plans don't play by all of the same rules as do governmental 457 plans. A major difference exists when it comes to the claims of creditors. The 457 plan assets of tax-exempt employers are subject to the claims of the employer's creditors, but those of plans sponsored by governmental entities are not. And the 457 plan assets aren't subject to the early withdrawal penalty.

The 457 plans have more investment options than the 401k. Both have index funds, bond funds, large cap, mid cap, small cap, value, and international funds. The 457 plans just have more choices for each type of fund. The 457 has over 22 choices versus 8 choices for the 401k. Also, you can invest in other funds if you directly make a request of the 457 administrator. Yes, more choices don't mean better choices. I have more research to do.

All else being equal, then the more extensive choices argue in favor of the 457. However, as you say, you have more research to do, and only you can do that.


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