CA Savings Plus: 401(k) and 457(b) Contributions and Withdrawals

The California Savings Plus Program is a voluntary retirement savings benefit for state employees, built around two separate accounts — a 401(k) and a 457(b) — that sit on top of your CalPERS pension. Run by the California Department of Human Resources (CalHR) and administered by Nationwide, Savings Plus lets you contribute to either plan or both at once, and because the IRS treats the two accounts as separate for deferral purposes, participating in both can double your annual tax-advantaged savings.¹² For 2026, that’s up to $24,500 in each plan before catch-up contributions.³

Who Can Participate

Savings Plus is open to most State of California employees, including staff in the California State University system, the Judicial Branch, and the Legislature.¹ Part-time, seasonal, and temporary employees who contribute to the PST Retirement Plan also qualify.⁴ There is no waiting period and no open enrollment window. You can join at any point during your state employment.

How the 401(k) and 457(b) Differ

Both accounts let you defer income for retirement. The practical difference is when you can pull money out without a federal penalty.

The 401(k) is a qualified retirement plan. Generally, you cannot withdraw funds until you leave state service or reach age 59½. Withdrawals before 59½ are hit with a 10% federal early withdrawal tax on top of ordinary income tax. There is one useful exception: if you separate from state service during or after the year you turn 55, the 10% penalty does not apply to 401(k) distributions.⁵ Public safety employees of state or local government get that break starting at age 50.

The 457(b) is an eligible deferred compensation plan for governmental employers. Its defining feature: once you separate from state service, distributions are not subject to the 10% early withdrawal penalty regardless of your age.⁶ If you expect to retire before 59½, that alone is an argument for funding the 457(b) first. One catch worth noting: money you roll into the 457(b) from a 401(k) or other qualified plan loses this treatment. Distributions of those rolled-in amounts are subject to the 10% penalty if taken before 59½.⁷

Both plans offer pre-tax and Roth after-tax contribution options, and you can split contributions between the two treatments inside each plan.

2026 Contribution Limits

Because the 401(k) and 457(b) have independent IRS deferral limits, funding both effectively doubles your annual ceiling.² The 2026 figures:

Standard deferral limit of $24,500 per plan, or $49,000 combined across both.³
Age 50+ catch-up of an additional $8,000 per plan, bringing each plan to $32,500 and the combined maximum to $65,000.³
SECURE 2.0 super catch-up for ages 60 through 63, which raises the catch-up to $11,250 per plan. That’s a per-plan ceiling of $35,750 and a combined maximum of $71,500 in the year you turn 60, 61, 62, or 63.³
The 457(b) special three-year catch-up. In the three calendar years before your plan’s normal retirement age, you can contribute up to $49,000 to the 457(b) in a single year. The exact amount is the standard limit plus any unused deferral capacity from prior years, capped at twice the annual limit. You cannot combine this with the age 50+ catch-up in the same year in the 457(b).⁸⁹

The 457(b) special catch-up is easy to miss. It depends on Savings Plus calculating the deferral room you left unused in earlier years. If you’re within three years of normal retirement age and didn’t always max out, ask for an underutilized-limit calculation.

Pre-Tax or Roth

Pre-tax contributions cut your current taxable income; you pay income tax when you withdraw in retirement. Roth contributions are made after tax, and qualified withdrawals — including earnings — come out tax-free.¹⁰ The choice usually turns on whether you expect a higher tax rate now or later. Employees earlier in their careers or in lower brackets often lean Roth; those near peak earnings often prefer the pre-tax break.

One change to watch: starting with the 2027 tax year, federal law will require employees who earned $150,000 or more in the prior year to make all catch-up contributions on a Roth basis.¹¹ The rule affects only catch-up amounts, not standard deferrals, with a mandatory effective date for taxable years beginning after December 31, 2026. Savings Plus may adopt it earlier on a voluntary basis.

Enrolling

You enroll through the Savings Plus portal at savingsplusnow.com. You’ll need your Social Security number, gross income, and pay frequency to complete the setup.¹² During enrollment you set your contribution rate, choose pre-tax or Roth, and decide how to split between the 401(k) and 457(b). Your plan sponsor pre-selects a default contribution rate and investment fund, but both can be changed at any time. Contributions come out of your paycheck automatically, and you can raise, lower, or pause them whenever your finances change.

Investment Options

Savings Plus organizes its lineup in three tiers.

Core Funds

The core menu includes actively managed funds and index funds covering short-term investments, bonds, and stocks across capitalization sizes and geographies. Expense ratios vary, with index options carrying lower costs than active alternatives.

Target Date Funds

The State Street Target Retirement Fund series offers vintages from 2025 through 2070, plus a Target Retirement Income fund for those already in or near retirement.¹³ You pick the fund closest to your expected retirement year, and its mix gradually shifts from stocks toward bonds as that date approaches. A reasonable default if you don’t want to manage the allocation yourself.

Self-Directed Brokerage Account

For experienced investors, the Schwab Personal Choice Retirement Account (PCRA) opens access to a wider range of mutual funds, individual stocks, and other securities.¹⁴ You must keep at least $2,500 or 50% of your total account balance (whichever is less) in the Savings Plus core funds per plan. Schwab charges no fee for the PCRA itself, but standard trading commissions apply, and Savings Plus may assess a maintenance fee.

Plan Fees

Savings Plus charges a flat quarterly administrative fee of $6.00 per plan. Participating in both plans means $12.00 per quarter. There’s also an asset-based fee of 0.04% annualized on the first $600,000 of your balance, capped at $60 per quarter. These fees are deducted from your account and are separate from the expense ratios inside individual funds. By institutional plan standards, the administrative costs are low, though they compound over decades.

Getting Money Out While Still Working

Ideally, retirement savings stay put until retirement. Savings Plus does provide two ways to reach the money earlier.

Loans

You can borrow for general purposes or to buy a primary residence. The maximum loan is the lesser of $50,000 or 50% of your vested account balance. One outstanding loan is permitted per plan, so you could have two at once if you use both accounts. Each loan carries a one-time $75 initiation fee, plus a $2 check fee if you take a paper check. The interest rate is prime plus a percentage set by CalHR.¹⁵

Repayment happens through payroll deductions with interest, and that interest returns to your own account. General-purpose loans generally run five years; primary-residence loans can extend longer. If you default — for example, by leaving state service with a balance outstanding — the remaining amount is treated as a taxable distribution.¹⁶ On a 401(k) loan default before age 59½, the 10% early withdrawal penalty applies on top of income tax.

Hardship and Emergency Withdrawals

The rules differ by plan. For the 401(k), you can request a hardship withdrawal for an immediate and heavy financial need — unreimbursed medical expenses, buying a primary residence, or postsecondary tuition and room and board.¹⁶ Under 59½, the 10% early withdrawal penalty still applies.⁵

For the 457(b), the equivalent is an “unforeseeable emergency” withdrawal. The qualifying circumstances are narrower, generally limited to severe financial hardship from illness, accident, casualty loss, or other extraordinary events beyond your control.⁶ Harder to qualify for, but 457(b) emergency withdrawals are not subject to the 10% penalty at any age.

Distributions After Leaving State Service

Once you separate, your balance becomes available. Your options carry different tax outcomes.

A lump-sum cash distribution is the simplest and the most expensive from a tax standpoint: the full amount is subject to ordinary income tax, and the plan withholds 20% federally at the time of distribution.¹⁶ Installment payments — a fixed dollar amount or a set number of years — spread the tax bill across multiple years.

A direct rollover into a traditional IRA, Roth IRA, or another eligible employer plan avoids immediate taxation and the 20% withholding.¹⁶ Rolling pre-tax money into a Roth IRA is a taxable event, though: you’ll owe income tax on the converted amount that year.

The Roth Five-Year Rule

Your Roth contributions themselves always come out tax-free. Earnings on those contributions come out tax-free only if the distribution happens after you reach 59½ (or after death or disability) and at least five full tax years have passed since your first Roth contribution to that plan.¹⁰ The five-year clock starts on January 1 of the year of your first Roth contribution to that specific plan, not the actual contribution date.¹⁷ Planning to retire in your mid-50s and draw on Roth money? Start Roth contributions at least five years ahead of your target date.

Required Minimum Distributions

Pre-tax balances can’t sit forever. Required minimum distributions must begin by April 1 of the year after you turn 73.¹⁸ Still working past 73? You can delay RMDs from Savings Plus until you actually retire — the required beginning date is April 1 following the later of the year you turn 73 or the year you separate from service.¹⁶ Under current law, the RMD age rises to 75 starting in 2033.

Roth accounts in Savings Plus were previously subject to RMDs, but starting in 2024, designated Roth accounts in 401(k) and 457(b) plans are no longer subject to required minimum distributions during the account owner’s lifetime.

Beneficiary Designations

Your beneficiary designation on file with Savings Plus, not your will, controls who receives your account balance when you die.¹⁹ With no beneficiary named, the account goes through probate. Update your designations online at least once a year and after any major life event: marriage, divorce, birth of a child.

Whoever inherits will face distribution rules based on their relationship to you. A surviving spouse has the most flexibility, including rolling the account into their own retirement plan. Most other beneficiaries must empty the inherited account within 10 years of your death.²⁰ Exceptions to the 10-year rule apply to minor children, disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than you.

1
California Department of Human Resources (CalHR). Savings Plus Program
2
Internal Revenue Service. How Much Salary Can You Defer if You’re Eligible for More Than One Retirement Plan
3
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
4
California State University San Marcos (CSUSM). Savings Plus Program
5
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
6
Office of the Law Revision Counsel. 26 USC 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations
7
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
8
Internal Revenue Service. Issue Snapshot – Section 457(b) Plan of Governmental and Tax-Exempt Employers – Catch-Up Contributions
9
Internal Revenue Service. Retirement Topics – 457(b) Contribution Limits
10
Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts
11
Internal Revenue Service. Treasury, IRS Issue Final Regulations on New Roth Catch-Up Rule, Other SECURE 2.0 Act Provisions
12
Savings Plus. Get Ready to Enroll
13
Savings Plus. Fund Mapping
14
Savings Plus. Self-Directed Brokerage Account (SDBA)
15
CalHR: Savings Plus. State of California Savings Plus Program Thrift Plan
16
Internal Revenue Service. 401(k) Resource Guide – Plan Participants – General Distribution Rules
17
Office of the Law Revision Counsel. 26 USC 402A – Optional Treatment of Elective Deferrals as Roth Contributions
18
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
19
Savings Plus. The Importance of Designating Beneficiaries
20
Internal Revenue Service. Retirement Topics – Beneficiary