403(b)

In the United States, a 403(b) plan is a U.S. tax-advantaged retirement savings plan available for public education organizations, some non-profit employers (only Internal Revenue Code 501(c)(3) organizations), cooperative hospital service organizations, and self-employed ministers in the United States.[1] It has tax treatment similar to a 401(k) plan, especially after the Economic Growth and Tax Relief Reconciliation Act of 2001.[2] Both plans also require that distributions start at age 72 (according to the rules updated in 2020), known as Required Minimum Distributions (RMDs).[3] Distributions are typically taxed as ordinary income.

Employee salary deferrals into a 403(b) plan are made before income tax is paid and allowed to grow tax-deferred until the money is taxed as income when withdrawn from the plan.

403(b) plans are also referred to as a tax-sheltered annuity (TSA) although since 1974 they no longer are restricted to an annuity form and participants can also invest in mutual funds.[4]

  1. ^ "403(b) Plan Basics". irs.gov. Internal Revenue Service. Retrieved 2016-09-02.
  2. ^ "How is a 403(b) different from a 401(k)?". cnn.com. Retrieved 2016-09-02.
  3. ^ "401(k) and 403(b) Plans: What's the Difference?". Investopedia. Retrieved 2023-05-18.
  4. ^ "The 403(b) Basics". 403bwise.com. Retrieved 2016-09-02.