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13 <br />Pros /Cons Summary - 401(k) Plan As Compared to 457* <br />1. Employer contributions to 401(k) plan are not subject to Social Security. Thus <br />County cost for the 401(k) contribution is about 7.65 percent less. <br />2. Several 401(k) plan provisions are stronger: <br />❑ A loan provision for any reason is available. This enables the employee to access <br />funds without withdrawal and does not require the employee demonstrate <br />hardship. Such loans may be used for college education, home improvement or <br />any other reason. The employee borrows from himself or herself and pays the <br />money back to him or herself with interest. Among other things, this may provide <br />some disability protection. <br />❑ Account fees paid by the employee are lower. <br />❑ There is greater portability. <br />3. Other local government employers with whom the County competes primarily offer <br />the 401(k) Plan. <br />4. The 457 Plan permits approved withdrawals without an IRS penalty. Some 401(k) <br />Plan withdrawals may involve an IRS penalty. [A 401(k) loan does not involve an <br />IRS penalty.] The terms to qualify for withdrawal are significantly more stringent <br />under the 457 than the 401(k). <br />5. The 457 plan permits different employer contribution amounts to different employee <br />groups such as by service or salary. The 401(k) Plan does not. <br />6. The 457 plan offers more investment options. <br />* Differences primarily result from the different sections of the Internal Revenue Code <br />[401(k) or 45 7] under which the plans operate. <br />(K:\Benefits\Misc \401 &457.Doc) <br />May 4, 1999 <br />