403b Plans

Named for a section of the tax code, 403b plans were authorized in 1958 to allow school districts, non-profits such as hospital, universities and charities to offer retirement plans to their employees. 

Currently there are 6.8 million participants and nearly $600 billion in 403b plans.

Initially the only investments allowed were annuities-insurance contracts that allow people to withdraw their savings in the form of a guaranteed lifetime stream of payments.  These original plans are often call Tax Sheltered Annuities TSA's and Tax Deferred Annuities TDA's.  Mutual funds were added as investment options in 1974. 

Plans at large colleges and national non-profits can look a lot like 401k plans.  Local school districts and small charities typically have a limited role in their 403b plans.  They allow financial firms to offer 403b accounts directly to employees and simply pass contributions subtracted from employees paychecks.  An employer generally allows a handful of firms to offer 403b plans.

----------------------- 

Contribution Limits

401k, 403b, 457 and Roth 401k

Tax Year          Under Age 50     Above Age 50

   2012             $17,000            $22,500

   2013             $17,500          $23,000