457 Deferred Compensation and Cash Match Plans
Employees participating in the Commonwealth of Virginia 457 Deferred Compensation and Cash Match Plans have the following options:
- They may keep their funds in the 457 Plan and continue to manage their investments. They cannot contribute to the plan unless they return to salaried or wage employment with an employer that offers the plan.
- If they have a Virginia Cash Match Plan account, they may request a rollover of their 457 Plan funds to their cash match account, an Individual Retirement Account (IRA) or another qualified retirement or tax-deferred savings plan.
- They may request a payment of their 457 plan funds and any cash match funds by electing a lump sum, a periodic payment or a combination of these distribution methods. Funds paid directly to them are subject to federal and state income taxes. Cash match funds also may be subject to a 10 percent federal tax penalty if the participant withdraws them before age 59½. Payments from the 457 Plan are not subject to this tax penalty.
- They may roll over payments for unused sick leave or annual leave into the 457 Plan account. This is allowed only if employees, prior to their last date of employment, provide their employer with a properly completed Payroll Authorization - One-Time Deferral form. The form must be submitted to the employer no later than the month prior to the month in which the contribution will be sent to the plan.
As provided under the Internal Revenue Code, participants cannot contribute cash severance payments to the 457 Plan. For more information, go to Defined Contribution Plans.