403(b) Plan Tutorial
  1. 403(b) Plan: Introduction
  2. 403(b) Plan: Eligibility Requirements
  3. 403(b) Plan: Contributions
  4. 403(b) Plan: Distributions
  5. 403(b) Plan: Conclusion

403(b) Plan: Introduction

By Denise Appleby

What Is a 403(b) Plan?
A 403(b) plan is a retirement plan for certain public school employees, employees of tax-exempt organizations and ministers. Individual 403(b) accounts are established and maintained by eligible employees.

Accounts under a 403(b) plan can be one of the three following types:

  • An annuity contract provided through an insurance company; these 403(b) annuity plans are also known as tax-sheltered annuities (TSAs) and tax-deferred annuities (TDAs).
  • A custodial account provided through a retirement account custodian; investments are limited to regulated investment companies, such as mutual funds.
  • A retirement income account, for which investments options are either annuities or mutual funds.
The employer may determine the financial institution(s) at which individual employees may maintain their 403(b) accounts, which in turn determines the type of 403(b) accounts that the employees may establish and fund.

Why Establish a 403(b) Account?
The following are advantages of maintaining a 403(b) plan or account:

For the employer:

  • Attractive benefits that help keep high-quality employees happy.
  • A shared cost of funding between employers and employees (in some cases, only employees contribute to the 403(b) plan).

For the employee:

  • Reduced taxable income through pretax contributions,
  • Tax-deferred earnings on plan contributions. If the contributions are made to a Roth 403(b) account, earnings can be tax-free.
  • The likelihood of paying less tax on assets as distributions usually occur during retirement, when an employee may be in a lower tax bracket.
  • The ability to take loans from the 403(b) accounts.
403(b) Plan: Eligibility Requirements

  1. 403(b) Plan: Introduction
  2. 403(b) Plan: Eligibility Requirements
  3. 403(b) Plan: Contributions
  4. 403(b) Plan: Distributions
  5. 403(b) Plan: Conclusion
  1. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  2. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...
  3. Self Invested Personal Pension (SIPP)

    A tax-efficient retirement savings account available in Great ...
  4. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...
  5. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  6. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  1. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  2. Who can make catch-up contributions?

    Most common retirement plans such as 401(k) and 403(b) plans, as well as individual retirement accounts (IRAs) allow you ... Read Full Answer >>
  3. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  4. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
  5. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
  6. Can catch-up contributions be matched?

    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>

You May Also Like

Trading Center