As an employed physician, are you tired of seeing half your paycheck go to taxes? Employed physicians face a lack of tax-sheltered savings space compared to their business-owning counterparts.
After you max out your 401k/403b, there are few options for tax-deferred savings. There is an option offered by some hospitals and health systems, the 457(b) plan.
On the surface, the 457(b) plan appears to be just what employed physicians need, more tax-deferred savings space!
An Introduction To The 457(b) For Physicians
The 457(b) plan is an employer-sponsored, tax-deferred deferred compensation plan. The information found online can be very confusing because the same section of Internal Revenue Code covers the 457(b) plan offered to 2 different types of workers:
The first type of 457(b) is provided to state and local government employees. Think teachers, police officers, firefighters, and other civil servants. These are known as governmental 457(b) plans
The second type of 457(b) is offered to high paid (top-hat) employees of nonprofits like hospitals and charities. Think physicians and administrators. These are known as non-governmental 457(b) plans.
Although they have the same name and fall under the same section of the tax code, they have very different rules that apply. If you left a non-profit hospital to work for the VA, you cannot roll a non-governmental(hospital) 457(b) plan into a governmental(VA) 457(b). They are separate programs with the same name.
For example, If you left a non-profit hospital to work for the VA, you cannot roll a non-governmental(hospital) 457(b) plan into a governmental(VA) 457(b). They are separate programs with the same name.
For the rest of this post, I will be referring to non-profit 457(b) plans.