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403(b) Plans

What is a 403(b) Plan?

A 403(b) plan, also known as a tax-sheltered annuity plan, is a retirement plan maintained by:

• The state for public school employees.
• An employer for it's minister.
• A tax exempt hospital, college, or university.
• A charitable organization tax-exempt under section 501(c)(3)

403(b) plans are similar to 401(k) plans that are maintained by "for-profit" entities. There are various limits, both individual and corporate, that need to be monitored within a retirement plan. While these limits are independent, each has an affect on the others.

• Deferral Limit: The lesser of 100% of gross compensation or $16,500 (2010).
• Age 50 catch-up contribution: Persons age 50 and over may defer an additional $5,500 deferral in 2010. This contribution is not included in the $49,000 415 limit.
• 403(b) special catch-up: The 15 year rule also known as “Lifetime Catch up” increases your 403(b) deferrals by the lesser of:
  • $3,000 (Not available to charitable organizations).
  • $15,000 reduced by increases to the general limit you were allowed in earlier years because of this rule (Not available to charitable organizations).
  • $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years (Not available to charitable organizations).

• 415 Limit: Personal Limit - The lesser of 100% of gross compensation or $49,000, (this includes any deferrals, match, profit sharing, and forfeitures the individual receives)
• Compensation Limit: $245,000