What is a 403(b) plan?

A 403(b) plan is an employer-sponsored retirement plan designed for nonprofit organizations, schools, and certain government entities. It functions similarly to a 401(k) plan and may offer comparable contribution limits and tax advantages, based on current IRS rules and plan design.

Who can offer a 403(b) plan?

403(b) plans are commonly used by qualifying employers such as nonprofit organizations and educational institutions, and may also be available to certain government entities, depending on eligibility requirements.

What are potential administrative considerations?

One potential benefit of a 403(b) plan is reduced administrative complexity for qualifying employers, as certain ERISA requirements may not apply in some cases. Whether ERISA applies depends on the employer type and plan structure.

What investment options are common in 403(b) plans?

Investment options in 403(b) plans may be more limited than some other employer plans and often focus on annuities and mutual funds. Even with a narrower investment menu, a 403(b) plan can still serve as an effective retirement savings vehicle when it aligns with the organization’s goals and participant needs.