A 403(b) plan, also known as a Tax-Sheltered Annuity (TSA) plan, is a retirement plan for employees of certain tax-exempt organizations such as your employer.
Individual accounts in a 403(b) plan can be one of the following types:
There are three benefits to participating in a 403(b) plan:
Only your employer can make contributions to your 403(b) account. These contributions are made under a salary reduction agreement. This agreement allows your employer to withhold money from your paycheck to be contributed directly into a 403(b) account for your benefit.
Generally, you do not report contributions to your 403(b) plan account on your tax return.
Your Maximum Allowable Contribution (MAC) is the maximum amount you may contribute to your 403(b) plan during a given year. Your limit may vary from year-to-year based on changes made by the IRS and changes to your personal circumstances.
In 2017, the base contribution limit is $18,000. You may be able to contribute more if you qualify for one of several catch-up’s (see below). If you qualify for the full amount of both catch-up's, you may be able to contribute up to $24,000 in 2017.
If you will have attained age 50 by December 31, 2017, you will be able to contribute an additional $6,000 to your 403(b). Also, if you have completed at least 15 years of service with your employer you are limited to least of: 1) $3,000 2) $15,000 less previously excluded special catch-ups, or 3) $5,000 multiplied by years of service minus previously excluded deferrals. (only if your plan permits)
If you exceed your annual contribution limit, taxes and additional IRS penalties may apply. Be sure you know and remain below your limit. However, not all plans permit catch-up contributions. Please check with either your employer or Kazdon.
Generally, a distribution from a 403(b) account may not happen until you meet a distributable event.
Distributable events include:
In most cases, the payments you receive are taxable as ordinary income. After you attain age 70 1/2, you may be required to take a minimum distribution from your 403(b) plan account each year. You may generally rollover tax free all, or any part, of a distribution from a 403(b) plan to an IRA or an eligible retirement plan. (Distributions made due to financial hardship are not rollover eligible.)
You may be able to transfer all or part of your interest from a 403(b) account to another 403(b) account tax free and without having met a distributable event. The receiving 403(b) account must be subject to the same or stricter distribution restrictions. You may also be eligible to transfer money from your 403(b) plan account to a defined benefit governmental plan. Consult your agent or Investment Provider regarding the availability of transfers.
Always consult with your agent or Investment Provider to understand the tax consequences and account specific fees associated with a distribution, rollover, or transfer.
In the past, transactions such as distributions, rollovers, hardship withdrawals, loans, and transfers were generally accomplished through your investment provider without any involvement from your employer. However, new IRS regulations now require your employer and your investment provider to share certain information and to coordinate when performing these transactions. A transaction authorization process is utilized in order to facilitate necessary coordination and information sharing. If you wish to perform a distribution, rollover, hardship withdrawal, loan, or transfer; your investment provider must receive authorization from your employer's third party administrator, Kazdon. Authorization is obtained through submission of an Authorization Form (available on your employer's forms page). Please note that in addition to the Authorization Form, your investment provider will likely still require submission of its own paperwork. Contact your investment provider for additional information.