403(b) Plan: Conclusion
  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: Conclusion

By Denise Appleby

A 403(b) plan is a retirement plan for certain employees of public schools, certain ministers and employees of certain tax-exempt organizations.

Let's recap:

  • Individual accounts in a 403(b) plan can be any of the following types:
    • an annuity contract, which is a contract provided through an insurance company
    • a custodial account, which is an account invested in mutual funds
    • a retirement income account set up for church employees, which can invest in either annuities or mutual funds
       
  • The features of the 403(b) plan are very similar to the 401(k) plan.
  • Employees' compensation is based on W-2 wages, and an employee's compensation in excess of $255,000 may not be considered for purposes of making a 403(b) contribution.
  • The investment options for a 403(b) account are determined by the 403(b) product.
    • A 403(b) annuity contract must invest in an annuity product provided through an insurance company.
    • A custodial account, which is provided through a retirement account custodian, must invest in regulated investment companies, such as mutual funds.
    • A retirement income account may invest in vehicles such as annuities and publicly traded securities. Only churches and church-related organizations may establish retirement income accounts.
  • Distributions while the employee is under age 59.5 are subject to a 10% early-distribution penalty unless the employee qualifies for an exception.

  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. Sequence Risk

    The risk of receiving lower or negative returns early in a period ...
  2. Nursing Home Resident Trust Fund

    An account in a nursing home that helps residents manage finances ...
  3. Backdoor Roth IRA

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

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

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

    Senior move managers (SMMs) help seniors downsize and relocate ...
RELATED FAQS
  1. Am I losing the right to collect spousal Social Security benefits before I collect ...

    The short answer is yes, if you haven't reached age 62 by December 31, 2015. The Bipartisan Budget Act of 2015 disrupted ... Read Full Answer >>
  2. Where else can I save for retirement after I max out my Roth IRA?

    With uncertainty about the sustainability of Social Security benefits for future retirees, a lot of responsibility for saving ... Read Full Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
Trading Center