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A 403(b) plan, named for section 403(b) of the Internal Revenue Code, is a retirement savings plan funded by employee contributions and employer matching contributions (though the latter are not required). The 403(b) plan is offered by tax-exempt entities such as churches, charities, and schools. The allowable contribution limit to a 403(b) plan changes over time, and contributions to a 403(b) plan are taken out of the employee’s payroll. As with many retirement plans, withdrawals from a 403(b) plan that are taken before the allowable age are subject to a 10% penalty. Contributions to a 403(b) plan are made with pre-tax income, but are taxed once they are withdrawn from the plan. All contributions to a 403(b) plan become become the property of the employee once they are made. |
