A 457(b) is a deferred compensation savings plan for employees of state and local government agencies, including public school employees. The name refers to the section of the Internal Revenue Code that governs the plan. The 457(b) was created in 1978, and is sometimes referred to as a deferred compensation plan.

While a majority of MCPS employees have access to the Maryland State Retirement and Pension System, even the best pension will not fund 100 percent of your retirement. Like the 403(b), the 457(b) plan provides a supplement to retirement income.

The 457(b) is important because, like the 403(b), the 457(b) plan provides a supplement to retirement income, and can reduce taxes on current income. For example, an employee earning $30,000 a year would be in the 15 percent federal tax bracket. If this employee contributed 10 percent of income or $3,000 to a 457(b), it would reduce taxable income to $27,000 ($30,000 less $3,000 457(b) contribution) and result in savings of $450 on federal income taxes (15 percent of $3,000). In this example, the $3,000 contribution would actually cost $2,550 ($3,000 less $450 tax savings).