403(b) Plan Tutorial
AAA
  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
RELATED TERMS
  1. Senior Move Manager

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

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

    An IRS-allowed movement of assets into or out of an individual ...
  4. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  5. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
  6. Peri-Retirement

    A term for the period of time leading up to actual retirement. ...
  1. How do Pay As You Go pension plans work?

    Learn how pay-as-you-go pension plans are different than fully funded pension plans and why some government plans are running ...
  2. Who is eligible for a Teacher Retirement?

    Learn about the retirement option, the Teacher Retirement System, offered to teachers and other public school employees, ...
  3. What's the difference between a financial advisor and a financial planner?

    Seeking professional advice from a financial advisor may involve asking for financial help from a certified financial planner, ...
  4. What are the main benefits of a Locked-in Retirement Account (LIRA)?

    Read about the main benefits you can realize from transferring your Canadian pension funds into a Locked-in Retirement Account, ...

You May Also Like

Related Tutorials
  1. By midlife, you're likely to have accumulated a string of IRAs, 401(k)s and the like.
    Retirement

    Consolidating Your Retirement Money

  2. Retirement

    Analyzing The Best Retirement Plans And Investment Options

  3. Budgeting

    The Complete Guide To Retirement Planning For 40-Somethings

  4. Retirement

    The Complete Guide To Retirement Planning For 50-Somethings

  5. Taxes

    The Complete Guide To Retirement Planning For 30-Somethings

Trading Center