State and local government employees would participate in which deferred compensation plan?

State and local government employees typically participate in a 457 deferred compensation plan. This type of plan is specifically designed for governmental and certain non-profit employees, allowing them to set aside a portion of their earnings for retirement while deferring taxes on those contributions and any investment earnings until they withdraw the funds.

One of the main benefits of a 457 plan is that it offers greater flexibility for employees, such as the ability to withdraw funds without penalties upon separation from service, regardless of age. Additionally, there are no age restrictions on withdrawals, which makes the 457 plan attractive for individuals who may need access to their funds earlier than traditional retirement plans allow.

In comparison, 401(k) plans are primarily intended for private-sector workers, while 403(b) plans cater to employees of public schools and certain tax-exempt organizations. The 408 option refers to an Individual Retirement Arrangement (IRA), which is not specifically geared toward state or local government employees. Because of these characteristics, the 457 plan is the most appropriate option for deferred compensation among state and local government employees.