The 457 plan is not a tax-qualified plan...
Huh? I'm confused. Maybe I don't understand what tax-qualified means but I would think that a 457(b) plan is tax-qualified as I have one and I don't pay taxes on the money I contribute there. Clicking the link, it looks like 457(b) plans are tax deferred but not 457(f).
Sorry, I'm using confusing financial lingo words, but it's the most precise way to communicate the difference. Generally, "tax-qualified pension plan" means that the plan has to conform to the rules set by ERISA (
http://en.wikipedia.org/wiki/Employee_Retirement_Income_Security_Act ).
ERISA compliance is somewhat burdensome, but necessary. Tax-qualified plans include money purchase pension plans, target benefit pension plans, profit sharing plans (the most popular type of which is the 401(k), and stock bonus plans.
There are other retirement plans that are much simpler (because they don't have to comply with ERISA) and they're called non-tax-qualified retirement plans. Examples would be SIMPLE IRAs, SEP IRAs, SARSEPS, and 403(b)s (which are subject to ERISA only if the employer contributes).
All of the tax-qualified plans have to coordinate the deferral limits according to the IRS tables I linked to.
457 plans are not retirement plans; most importantly, they're not tax-qualified pension plans. They are technically nonqualified deferred compensation plans. Therefore, although they allow you to defer the taxes (which is the tax benefit you're referring to), they don't have to integrate with the 401(k) numbers.
If you're really into this stuff, you could have a lot of fun figuring out ways to layer the plans together, but in real life most people either have one job or one business and are going to simply use one or two types of plans.
But, for fun, you could have an Advanced Mustachian individual age 55 who works for a private company (for example a private law firm), a second, unrelated private company, and a governmental organization (for example a local/municipal government organization) too. Theoretically that individual could set this up in 2013:
1. Defer $17,500 of their income into a profit sharing plan with 401(k) provisions at the law firm. The firm could make additional additions to the plan up to a total of $51,000. They can also make an additional $5,500 catch-up contribution. Total into plan = $56,500 ($17,500 deferral, $33,500 employer additions, plus $5,500 catch-up contribution). (All of this has to comply with the ERISA rules for non-discrimination between employees. Consider opportunities for a solo 401(k) though.)
2. If the second, unrelated private company were to have a money purchase plan, that company could make a contribution of $51,000 into his account.
3. If the governmental organization has a 457 plan, he can defer $17,500 of income into that plan plus an additional $5,500 of catch-up contributions. In fact, if he is an employee with 15 years of service with the same employer, there's an additional $3,000 catch up available. (Total would be $26,000 into that plan: $17,500 + $5,500 catch up + $3,000 bonus catch up.)
If we wanted to get stupid, we could layer in non-deductible IRAs with Roth conversions, HSAs, additional non-qualified deferred comp plans, etc.
Obviously this is a made-up scenario. I've never seen a situation like this but it is theoretically possible. Usually if the person were this engaged in their planning they would be quite wealthy and we'd move out of the retirement plan discussion more into the estate planning discussion and use different techniques. The problem with all these retirement plans is that at some point the money has to come out and the tax be paid (either RMDs or at death) and we might want it in a different bucket or we might want it outside of the estate.
But hopefully it illustrates the meaning of the term "tax-qualified" in an interesting way.