How Taxes Affect Your Benefits
Your 457(b) Savings Plan benefits are not subject to federal (and in some cases state and local) income taxes while in the Plan. When you receive a distribution, you are responsible for paying the applicable income taxes. Any assets distributed from your 457(b) plan will be taxable as ordinary income according to the federal tax tables. Distributions will be taxed as wages in the year in which you receive them. You also have the opportunity to withhold additional amounts if needed. Unlike a qualified plan, such as your Boston University Retirement Plan account, any distribution you receive from the 457(b) Savings Plan will not be subject to an early distribution penalty tax — even if you receive it before age 59½. Because federal laws are complex and change from time to time, you should consult a tax advisor regarding the tax treatment of your 457(b) Savings Plan benefits or a distribution from your account.