What is 403 (B) Plan


A 403(b) Plan is very similar to but different from a 401(k). This is because the 403(b) plan is a retirement account set up for workers in public schools and tax-exempt organizations. Unlike a 401(k) plan, it doesn't involve workers in the private sector. Those that are allowed to participate in the plan include school administrators, teachers, professors, doctors, nurses, librarians, and government employees. Religious organizations are also allowed to participate in the plan but there is a different 403(b) plan set up for religious bodies, the 403(b) (9) plan.


Understanding 403(B) Plan

403(b) operates faster vesting of fund and the opportunity to make additional catch-up contributions.  However, it uses the same maximum stipulated amount of money applicable to the 401(k) plan.


Like the 401(k) plan, 403(b) plan contributions can be from the employer and the employee. However, in 2020, the contributions of both persons were reduced to $57,000 maximum.


Also, like the 401(k) plan, 403(b) offers a catch-up contribution opportunity of $6,500.


In a very rare and special case, an employee can run both 401(k) and 403(b) plans. In this case, the employee can contribute the maximum stipulated amount into both accounts.


Benefits Of 403(B) Plans

  1. Returns and earnings on the 403(b) retirement plan are tax-differs until withdrawal.

  2. With the 403(b) plan, employees can be eligible for matching contributions. Plans that do not offer this deny the employer of the free money that comes with the contributions.

  3. Employees that do not meet the matching contributions would forfeit the Employee Retirement Income Security Act (ERISA) standard that ensures adequate plan security as he or she would be exempted from nondiscrimination testing.

  4. Generally, 403(b) plan fund vesting is faster than 401(k), in fact, most times vesting of funds is done immediately. Also, there is an additional catch-up contribution for an employee that has worked for 15 years and above in a government or non-profit organization.


  1. 403(b) plan offers two types of retirement accounts. The traditional and the Roth.  Roth can be withdrawn without tax payment while traditional account entails the payment of tax before any withdrawal is allowed.


Before an employer can withdraw from his or her 403(b) account, he or she must have reached the age of 59½ or totally disabled. Any other withdrawal that does not meet these two conditions would attract the 10% penalty on early distribution.

403(b) plan offers a unique bonus to those who have worked with the same employer for 15 years.


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