Under the Internal Revenue Code, a 403(b) plan is a retirement plan that can be offered to employees of public schools, employees of certain 501(c)(3) tax-exempt organizations and eligible church ministers. This type of retirement savings plan allows participants to make pre-tax contributions, and earnings on the contributions are not taxed until they are distributed from the plan.Know More
Contributions to a 403(b) plan, also called a tax-sheltered annuity plan, are typically deducted from an employee's pay on a pre-tax basis using a salary reduction agreement. Under Internal Revenue Service regulations, the end effect is to lower the employee's taxable pay and current federal income tax burden.
Each year, the IRS sets limits on the amount of pre-tax income an employee can contribute to a 403(b) plan. For 2015, the limit has been set at $18,000, while the limit was $17,500 in 2013 and 2014. The IRS penalizes individuals who contribute more than the set limit to a 403(b) retirement plan.
Plan participants direct the investment of their contributions, called elective deferrals, by picking investment vehicles offered through their employer, as explained by the IRS. These elective investments can rise or fall in value based on market conditions, so it is possible for an employee's 403(b) retirement fund to have a lower value than the amount contributed.Learn more about Financial Planning
The 457(b) plan is a type of retirement plan that is only available to state or federal employees or employees of tax-exempt organizations, as of 2015, according to the Internal Revenue Service (IRS). It works in much the same was as other more recognizable retirement plans, such as 401(k) and 403(b) plans and is classified as a non-qualified tax-deferred contribution plan, although the 457 plan allows for withdrawals at any time after leaving a job without any age requirements. Unlike 401(k) plans, withdrawals from 457 plans are penalty free.Full Answer >
A 457(b) plan, also known as deferred compensation, is a retirement and savings program for state governments, local governments and certain tax-exempt organizations that allows employees to defer a portion of their salaries into specific investment accounts, such as a Roth IRA. Employees enroll in 457(b) plans through their employers.Full Answer >
A 457 retirement plan is a retirement savings account offered to government employees and some employees of nonprofit organizations, states CNN Money. Advantages over other retirement plans include no penalties for early withdrawals and enhanced catch-up contribution options, reports Kiplinger.Full Answer >
A 403(b) is a defined contribution retirement plan offered to eligible employees in public schools, tax-exempt organizations and churches, according to the Internal Revenue Service. Contributions deferred by eligible employees into their 403(b) accounts are not subject to state or federal income tax until distribution.Full Answer >