Here on the ADMIN blog, we have a number of discussions surrounding 403(b) Plans. The reason for this is because this is our niche. While we do work on other retirement plan types, 403(b) is our ‘sweet spot’ and is where a lot of our expertise lies. With this being said, we wanted to share a little more about 403(b) plans and who actually qualifies for this type of Plan.
Part One of this series takes a step back and defines what exactly a 403(b) plan is, who is it meant for, and how it differs from more well-known retirement plans such as a 401(k).
A 403(b) Plan, also referred to as a tax-sheltered annuity (TSA) plan, was built for individuals who are either in need of a supplemental retirement plan or are part of a not-for-profit organization. Those approved for this plan type are in one of the following industries: public education, religious organizations, local governments, and non-profits who file as a 501(c)(3). Unlike a 401(k) Plan, a retirement plan created for for-profit companies, the organizations using a 403(b) can be exempt from certain administration requirements, such as ERISA. The ability to be ERISA-Exempt is based on rules/regulations surrounding each organizations type. For example, 403(b) Plans for a non-profit 501(c)(3) will have different rules surround ERISA than say a religious organization. We will dive deeper into these specifics in Part Two.
For the most part, the 403(b) retirement plan is similar to other retirement plans that are used by for-profit companies. The overall goal is to allow employees of a tax-exempt organization to save for their future. To learn more about why it is important to invest into the retirement plan offered by your employer, check out our two-part series on investing in 403(b) plans.
Stay tuned: later this week will look at what types of organizations qualify for a 403(b) retirement plan!