403(b) PLANS

The 403(b)  is a retirement savings plan targeted to tax-exempt and non-profit organizations including public schools and universities. 403b retirement plans are funded by employee contributions and, at times, employer matching.  Unlike the 401k plans that many companies offer employees, 403b plans are considered non-qualified as retirement plans by the federal tax code and are typically viewed in the same way as tax sheltered annuities.

In addition to the non-qualified status of the 403b plans, they also have what some consider confusing rules with regard to contributions.  These plans allow for larger maximum contribution each year, calculated as 25% of your total annual compensation up to $30,000.  If your contributions are more than the allowed total, they are considered taxable income and you must declare them.  This maximum includes any matching contributions provided by your employer.

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