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Section 403(b) plans are also referred to as a tax sheltered annuity or TSA. They are a special type of retirement plans for certain tax-exempt organizations and public education organizations.
History
Section 403(b) was created by Congress in 1958 to limit the contributions being made toward tax-deferred vehicles. In 1961 the plans were extended to public school employees. In 1964 many of the current regulations were written and implemented.
Contributions
Section 403(b) plans may receive various types of contributions such as:
1. Employee Deferrals
2. Employer Matching Contributions
3. Employer nonelective contributions
4. Employee after-tax contributions.
5. Pre-tax Roth contributions were made available in 2006.
Eligible Employers
1. Sate or subdivisions of a state.
2. State agencies
3. District of Columbia
4. Indian Tribal Governments
5. Not for Profits under Section 501(c)(3).
6. School districts
Investment Alternatives
1. Annuities Section 403(b)(1)
2. Custodial Accounts 403(b)(7)
3. Retirement Income Accounts 403(b)(9) - Church plans only.
Contribution Limitations
1. Section 415 - total contributions must not exceed $46,000 (in 2008)
2. Section 402(g) - Employee deferrals must not exceed $15,500 (in 2008)
3. Catch up contributions for employee deferrals.
a. Any employee age 50 or older in the current year may make an additional $5,000 in 2008.
b. Special catch up contribution is available for employees who have been with a single employer for 15 years or more.