Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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Which type of employees typically use 457 Plans?

  1. Employees of private corporations

  2. Employees of state and local governments

  3. Employees of non-profit organizations

  4. Employees of federal agencies

The correct answer is: Employees of state and local governments

457 Plans are primarily designed for employees of state and local governments, as well as certain non-profit organizations. These plans offer a way for eligible employees to defer a portion of their salary into a retirement savings account, providing tax advantages similar to those of 401(k) plans. The primary audience for 457 Plans is employees of state and local governments because they are specifically tailored to their compensation structures and retirement planning needs. In many cases, these government employees may have access to both a 457 Plan and other retirement plans, such as a pension or a 401(k). While certain non-profit organizations may offer 457 Plans, the predominant users are state and local government employees, making this the most accurate answer to the question. Other types of employees, such as those in private corporations, federal agencies, or broader non-profits, generally do not have access to 457 Plans or have other retirement plans suited for their employment context.