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

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
Related Articles
  1. Retirement

    Top 9 Benefits Of A 403(b) Plan

    A 403(b) plan is a tax-sheltered retirement plan for employees of many non-profit entities, including public safety and educational organizations.
  2. Financial Advisor

    Top 403(b) Questions Answered

    This plan doesn't get as much attention as its more popular cousin - the 401(k) - but it has a lot of benefits for eligible investors.
  3. Retirement

    Explaining the 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers.
  4. Retirement

    Top 9 Benefits of a 403(b) Plan

    Find out how the 403(b) plan helps employees of nonprofit entities meet their retirement goals.
  5. Retirement

    Got a 403(b) Plan? Here's What You Need to Know

    Many folks do not understand the ins and outs of their 403(b) plan. Let's change that.
  6. Retirement

    What to Do With Your 403(b) Funds if You Change Jobs

    If you have a 403(b) plan and change jobs, there are a few options for handling the funds in it.
  7. Retirement

    How a 403(b) Works After Retirement

    Everything you need to know (don't be afraid to ask) about handling your 403(b) plan when you retire.
Frequently Asked Questions
  1. Who are Whole Foods' (WFM) main competitors?

    Whole Foods' main competitors are Sprouts Farmers Markets and Trader Joe's. However, the recent acquisition by Amazon my ...
  2. What caused the Stock Market Crash of 1929 that preceded the Great Depression?

    Find out what led to the stock market crash of 1929, which in turn led to the Great Depression. It sparked a nearly 90% loss ...
  3. How does inflation affect the exchange rate between two nations?

    Inflation is closely related to interest rates, which can influence exchange rates. Countries attempt to balance interest ...
  4. What are some examples of free market economies?

    In a free market economy, the law of supply and demand, rather than a central government, regulates production and labor. ...
Trading Center