How is a nongovernmental 457(b) plan different and riskier than a governmental one?

A governmental 457(b) holds assets in trust for you, so your money is protected if the employer has financial trouble, much like a 401(k). A nongovernmental 457(b), offered by some tax-exempt nonprofits and hospitals to select highly paid employees, is different: the assets legally remain the employer's property and are subject to the employer's creditors.

That creditor exposure is the big risk. If the nonprofit becomes insolvent, your deferred savings could be lost. Nongovernmental 457(b) money also cannot be rolled into an IRA or another plan type; it can only move to another nongovernmental 457(b). Distribution timing is often locked in by an election you make in advance. Weigh these constraints carefully, and generally fund a 401(k) or 403(b) match first.