Final answer:
Section 457 plans are tax-advantaged deferred compensation retirement plans with limits on the amounts deferred for eligible plans, and ineligible plans, designed for executives, which do not have contribution limits but are taxed earlier.
Step-by-step explanation:
Section 457 plans are one form of non-qualified, tax-advantaged deferred compensation retirement plans that are available for government and certain non-government employers in the United States. The correct statements about these plans are that:
- Eligible Section 457 plans are regulated by the IRS and do have limits on the amounts deferred, which helps to preserve their tax-advantaged status.
- Ineligible Section 457 plans (sometimes referred to as Section 457(f) plans), unlike their eligible counterparts, are typically designed for highly compensated employees and executives, and do not have the same contribution limits. However, they also don't offer the same tax deferral benefits and are subject to more immediate taxation.
These plans should not be confused with 401(k)s and 403(b)s, which are more common defined contribution plans where both employees and employers can make contributions, and the assets in the plan are portable between jobs. The real rates of return on the investments in 401(k)s and similar accounts can help retirees keep up with inflation, unlike fixed income from traditional pensions, which can lose buying power over time due to inflation.