403(b) Retirement Plans

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Also known as a tax-sheltered annuity plan. A 403(b) plan is a retirement plan for certain employees of public schools, employees of certain Code Section 501(c)(3) tax-exempt organizations and certain ministries and churches. In other words, a 403(b) plan is a retirement plan used by nonprofit organizations and governmental entities. This type of plan allows employees to contribute (defer) some of their salary/paycheck either pre-tax [or ROTH (after-tax) depending on the plan design]. The contribution limits are the same as the 401(k) plan, but compliance tests for employee contributions are treated differently than in a 401(k) plan. A 403(b) plan may offer employer contributions such as a match and can be combined with an optimized profit sharing (also called an employer nonelective contribution) to allow for more robust benefits to key employees. These employer contributions are subject to compliance testing however. There are two types of 403(b) plans: ‘subject to ERISA’ which means a Form 5500 must be filed annually and ‘not subject to ERISA’ which means the filing of a Form 5500 is not required.

It is crucial to understand the difference!

PPC consultants can help make sure your 403(b) plan meets all Federal requirements!