403(b) Plan

403(b)

A retirement investment plan for employees of certain non-profit organizations in which a contributor defers taxation on contributions until after withdrawal. Under a traditional 403(b), a worker places a portion of his/her pre-tax income into a 403(b) account and allows it to be invested. Taxation is deferred until withdrawal from the account, generally after retirement. 403(b)s are employee benefits, and workers must have a sponsoring employer such as a public school or a church in order to take advantage of one. They are the non-profit worker's equivalent of a 401(k).

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403(b) plan

See tax-sheltered annuity.

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403(b) Plan

What Does 403(b) Plan Mean?

A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for employees of public schools, certain tax-exempt organizations, and certain ministers. 403(b) plan accounts can be any of the following types: (1) an annuity contract, which is provided through an insurance company; (2) a custodial account, which is invested in mutual funds; or (3) a retirement income account set up for church employees. Generally, retirement income accounts can invest in either annuities or mutual funds.

Investopedia explains 403(b) Plan

The features of the 403(b) plan are very similar to those of the 401(k) plan. Employees may make salary deferral contributions that usually are limited by regulatory caps.

Related Terms:
• 401(k) Plan
• Individual Retirement Account
• Qualified Retirement Plan
• Tax Deferred
• Traditional IRA