A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan offered by public schools, certain charities, and other tax-exempt organizations. It is similar to a 401(k) plan, but with some differences in terms of who can offer it and how it works.
Here are some key features of a 403(b) plan:
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Participants: Employees of public schools, certain charities, and other tax-exempt organizations, such as teachers, school administrators, professors, government employees, nurses, doctors, and librarians, are eligible to participate in a 403(b) plan.
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Contributions: Participants can save money for retirement through payroll deductions, and there is an option for the employer to match part of the employees contribution.
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Tax benefits: Contributions to a 403(b) plan are made on a pre-tax basis, which means that the employee has put away some money for the future and at the same time reduced his or her gross income (and income taxes owed for the year) .
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Investment options: 403(b) plans have high contribution limits and diversified investment choices, and participants can choose where their money goes and how much theyll contribute.
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Withdrawals: There are strict guidelines for when participants can make withdrawals from a 403(b) plan, and early withdrawals may result in a 10% penalty.
In summary, a 403(b) plan is a retirement plan offered by public schools, certain charities, and other tax-exempt organizations, and it allows employees to save money for retirement through payroll deductions while enjoying certain tax benefits.
