403(b) accounts are only available for certain specialized workers, such as public school staff members and people who work for eligible tax-exempt organizations, says the IRS. Since they cannot open their own 403(b) accounts, employees must rely on employers to fulfill this function. Self-employed ministers can have 403(b) accounts if these accounts are opened by their denominations. When it comes to 403(b) accounts, self-employed ministers are considered both employees and employers.
A 403(b) plan is a tax-sheltered retirement plan also referred to as a TSA, according to the IRS. People do not pay income taxes on 403(b) contributions until they start making withdrawals, which usually occurs at retirement. Typically, people must continually pay Social Security and Medicare taxes on their 403(b) contributions. People eligible to have 403(b) accounts include chaplains who work for state prisons or the U.S military.
403(b) accounts are funded through elective deferrals defined through salary reduction agreements, reports the IRS. Under these agreements, employers withhold pay that is then transferred directly into the employee's 403(b) account. All other types of 403(b) contributions are called nonelective contributions. In general, people needn't report 403(b) contributions on their income tax returns. Employers can determine which financial institutions house their employees 403(b) accounts, according to Investopedia.