A governmental 457(b) is the only major retirement account you can tap at any age after you leave service without a 10% penalty. Roll it into an IRA and that advantage can disappear. See what it is worth in your own numbers.
Distributions from a governmental 457(b) are not subject to the 10% early withdrawal tax, at any age, once you separate from service. The IRS puts it plainly: an eligible state or local government 457 plan "isn't a qualified retirement plan and any distribution from such plan isn't subject to the 10% additional tax on early distributions." Roll that money into a traditional IRA and it becomes IRA money, which is subject to the 10% additional tax before age 59½. If you retire in your forties or fifties and expect to spend from this account before 59½, the timing of a rollover matters more than almost anything else you will decide about it.
For 2026 you can defer $24,500 into a governmental 457(b), up from $23,500 in 2025. At 50 or older you can add a $8,000 catch-up, for $32,500. If you turn 60, 61, 62 or 63 in 2026 the catch-up is $11,250 instead, for $35,750, if your plan allows it. NYC Deferred Compensation lists that $35,750 figure and sets the same limits separately for its 401(k), so you can fill both.
New for 2026, the Roth catch-up rule. If your 2025 FICA wages from that employer (Box 3 of your W-2) were over $150,000, your 2026 catch-up has to go in as Roth, after tax. Overtime pay is part of that wage figure, so a base salary well under $150,000 can still cross it. NYC Deferred Compensation says that for these members the pre-tax goal stays at $24,500 and pre-tax contributions stop once it is reached. To keep making the catch-up, you switch it to a Roth deferral in your online account.
2027 limits: not published yet. As of October 11, 2026 the IRS had not announced them. We will update this box the day it does.
Sources: IRS Notice 2025-67 (the 457(e)(15) limit, both catch-ups, and the Roth catch-up wage threshold under section 414(v)(7)(A)); NYC Deferred Compensation Plan, "New for 2026 - Roth Only Catch-Up Contributions"; NYC DCP, Contribution Limit Increases in 2026. All read October 11, 2026.
Nothing is saved and nothing is sent. The numbers stay in your browser.
Your situation
What it costs
Your 2026 limits
What you can defer
The New York City Deferred Compensation Plan publishes this grid for its own participants. Read the first row against the last one. The 457 never triggers the penalty. A traditional IRA triggers it at every age until 59½. That difference is the entire reason rollover timing matters.
| Plan | Under 50 | Age 50 to 54 | Age 55 to 59½ | 59½ and older |
|---|---|---|---|---|
| 457 | No | No | No | No |
| 401(k) | Yes | No* | No | No |
| 401(a) | Yes | No* | No | No |
| Traditional NYCE IRA | Yes | Yes | Yes | No |
* Effective for distributions after December 31, 2015. Source: New York City Deferred Compensation Plan, "When does the 10% Penalty Apply." The 401(k) and 401(a) exemption at age 50 is for public safety employees only. It comes from the Pension Protection Act of 2006 and the Defending Public Safety Employees' Retirement Act of 2015, and federal law (IRC 72(t)(10)) now covers police, firefighters, EMS and corrections officers. It starts in the calendar year you turn 50, or at any age once you have 25 years of service under the plan. Everyone else gets the same exemption from the calendar year they turn 55 (IRC 72(t)(2)(A)(v)). Either way it covers money taken from the 401(k) or 401(a) after you leave, not money rolled to an IRA, and is claimed on IRS Form 5329.
These answers come from the New York City Deferred Compensation Plan's own pages and forms. The plan's terms control, so check the current form before you file.
Request it online in your account or send the Plan's Participant Distribution Form. A distribution can't start until the 45th day after you leave City service. You don't have to take anything right away: the Plan lets you leave the money in until required minimum distributions start at 73. When you do withdraw, you pick one of four methods: the whole balance, a partial withdrawal, installments, or a partial withdrawal followed by installments. Pre-tax money is ordinary income in the year it's paid, and there's no 10% penalty on the 457 at any age once you've separated.
Yes. The Plan lets you roll the pre-tax 457 into the NYCE IRA, another 457, 401(k) or 403(b), or a retail IRA. Ask for a direct rollover: no income tax is withheld when the money moves straight to the new account, while an eligible payment made out to you has 20% federal tax withheld. If you want part paid to you and part rolled over, the Plan needs a separate form for each. The Plan's own warning is the one to read twice: once 457 money is rolled over, it "may become subject to a 10% early withdrawal penalty." That is what the calculator above prices.
It's an account inside the City's 401(k) Plan built to take money from your pension system or union at retirement. Only two kinds of money go in: federally tax-deferred pension money (414(h) funds, such as a final pension payment or the outstanding balance of a pension loan) and union annuity funds. You open it with the Plan's Final Pension Payment/Outstanding Loan or Union Annuity Fund Rollover Form. The Police Pension Fund's own rollover notice points the same way: the Deferred Compensation 457(b) Plan does not accept its rollovers, and the 401(k) Plan accepts pre-tax ones.
The tax treatment is the reason it exists. The Plan's fact sheet says the pension contributions you roll in were already taxed by New York, so when they come back out they are subject to federal tax but not New York State or City tax if you live anywhere in New York. Any growth on them is taxed by all three. New York's Tax Department reached a similar split in an April 2024 advisory opinion on union annuity and pension money rolled to an IRA. Keep your pension statement showing the rollover amount, because you need it to prove which dollars are exempt. Because the account sits in the 401(k) Plan, not the 457, ask the Plan which row of the penalty table above applies to you before you count on taking money from it early. If you are weighing a rollover to an outside IRA, this account is the City option to compare it against.
Only while you are an active City employee. The most you can borrow is the lesser of half your account value or $50,000, and the $50,000 is reduced by your highest outstanding loan balance in the past 12 months from every City plan, pension loans included. That cap is built on the federal loan limit in Internal Revenue Code section 72(p). Police Pension Fund members send the loan application through the Police Pension Fund, and the Plan says those forms must be notarized. The loan comes due when you leave City service; if you can't pay it off, the balance is offset and reported as income. How the offset works and the tax you can undo.
The Plan's Client Service Center is (212) 306-7760. Account login and forms are at nyc.gov/deferredcomp.
Retiring from the FDNY? Run the FDNY pension calculator to see your pension and your 457 together, or get the free FDNY Pension Book.
Sources, read October 11, 2026: NYC Deferred Compensation Plan, Withdrawing Assets, Participant Distribution Guide and Form, Loans and Loan Guide, 401(k) Special Rollover Account fact sheet and form; NYC Police Pension Fund, Form 80 rollover notice; NYS Department of Taxation and Finance, TSB-A-24(3)I; 26 U.S.C. 72(p)(2)(A) and 3405(c).
It is worth being direct about that. When you move a 457 to an IRA, an advisory firm can manage it and charge a fee on it. When you leave it at the Deferred Compensation Plan, we cannot. The same is true of anyone paid to move it, whether by fee or by commission: how your adviser gets paid, and what to ask them.
And a rollover can still be the right call. DCP has a limited fund menu, no ability to hold individual positions, and rules that may not fit an estate plan. Those are real reasons people move money, and they do not disappear because of the penalty rule.
But if you separate at 47 and expect to live on this money at 52, a rollover done at the wrong time can cost you ten cents on every dollar you touch before 59½. That is not a detail to discover afterwards. The honest answer for a lot of members is to leave some of it in the 457 as the bridge to 59½ and move the rest, and the only way to know the split is to look at your actual spending plan.
Talk it through: free 15 minutes
No products, no commissions. Planning conversations are led by our Chief Investment Officer, William Harrison, the firm's registered adviser.
Stay Informed
Rule changes to the 457(b) and NYC pensions, explained in plain English when they happen.
No spam. Unsubscribe anytime.