However, 457 plans do not include the 10% penalty on early withdrawal of funds as under code 401. Also, independent contractors for the business managing the fund may participate, which is not permissible with 401(k) plans. Additionally, those who participate in a 457 type retirement plan may not make designated Roth contributions as might those who are participating in a 401(k) plan.

Primarily, 457 plans may only be offered by governmental agencies. By meeting certain qualifications, some nongovernment entities, such as non-profit organizations, may manage 457 plans for their employees to participate in. Most 457 plans are specifically under code 457(b), although some are designated 457(f). 457(f) plans are limited to employees of a higher tier within a non-profit organization. This tier may be defined by level of management, salary, or seniority.