Online Guide to
414(h) Retirement Plans

414(h) Plans permit public governmental employees of any State, political subdivision, agency or instrumentality thereof to save for retirement without paying income taxes on contributions to the 414h plan, or on any earnings until it is withdrawn.

Under the plan, the government employer determines the contribution amount. The contribution consists of a required or "mandatory" employee contribution and an employer contribution. Because the employee "mandatory" contribution is "picked up" by the employer under the provisions of Internal Revenue Code 414(h), the employee pays no income tax on this mandatory contribution.

Most employers make participation in a 414h plan a condition of employment.