403(b) Plan
What Is a 403(b) Plan?
A 403(b) plan is a retirement savings plan offered to employees of certain nonprofit organizations, public schools, and religious institutions. Similar to a 401(k), the plan allows participants to contribute pre-tax income to a retirement account that grows tax-deferred.
These plans are sometimes referred to as tax-sheltered annuity (TSA) plans.
Why It Matters
A 403(b) plan provides employees in nonprofit and public service sectors with an opportunity to save for retirement through tax-advantaged contributions and investment growth.
The plan often includes investment options such as mutual funds or annuities.
How a 403(b) Plan Works
Employees contribute to the plan through payroll deductions.
Typical features include:
- pre-tax salary contributions
- tax-deferred investment growth
- employer contributions in some cases
- retirement investment options
Participants can choose how their contributions are invested based on the plan’s offerings.
403(b) Plan vs 401(k)
- Both plans offer tax-deferred retirement savings.
- A 403(b) plan is typically offered by nonprofit or public institutions.
FAQs About 403(b) Plans
Who can participate in a 403(b)?
Employees of public schools, nonprofits, and certain religious organizations.
Are contribution limits similar to 401(k) plans?
Yes, limits are generally comparable.
Can funds be rolled over?
Yes, funds may be transferred to other eligible retirement accounts.
Related Terms
