403(b) Plan Basics
A 403(b) is a tax deferred retirement plan available to employees of non-profit organizations, as determined by section 501(c)(3) of the Internal Revenue Code. These organizations usually include educational institutions, churches and certain healthcare professionals. Similar to a 401(k) plan, contributions and investment earnings in a 403(b) plan grow tax deferred until withdrawal (assumed to be at retirement), at which time they are taxed as ordinary income.
Over the past forty years, the 403(b) arrangement has evolved into a retirement plan similar to a qualified plan. In response, Congress has imposed many of the qualified plan requirements on 403(b) plans with the passing of the final 403(b) regulations (2007-9340) on July 26, 2007. The major changes in the regulations were the requirement of a written plan and the objective to make the administration of a 403(b) similar to 401(k) and 457 plans. The deadline to comply with the regulations is January 1, 2009.
To comply with the final regulations, you will need to become educated on the topic, acquire a written plan document, determine how to administer the plan, and process the correct
government forms.
For more information about 403(b) plans, refer to educational events and/or subscribe for pension technical update e-mails as new legislation becomes available.