July 25


403(b) Retirement Plan: Which Employers Qualify?

By Harrison O'Reill

July 25, 2023

Imagine this scenario: You’ve been diligently contributing to your 403(b) retirement plan for years, dreaming of a comfortable future. But as you near retirement age, you stumble upon a perplexing question: which employers actually qualify for this plan?

It’s a common predicament that leaves many confused and anxious about their financial security. In this comprehensive article, we delve deep into the world of 403(b) plans, exploring the intricate details of employer eligibility.

It is important for employers to understand the regulations and requirements associated with these plans before offering them to their employees.

Overview of 403(b) Retirement Plans

A 403(b) plan is a tax-advantaged retirement plan available to employees of certain non-profit organizations, public schools, and churches. Similar to a 401(k) plan, a 403(b) plan allows employees to save for retirement by making pre-tax contributions through payroll deductions.

Types of 403(b) Plans

There are two types of 403(b) plans: the traditional 403(b) and the Roth 403(b). Traditional 403(b) plans allow employees to defer taxes on their contributions until they withdraw the money in retirement, while Roth 403(b) plans allow employees to make after-tax contributions and withdraw the money tax-free in retirement.

Investment Options

403(b) plans typically offer a variety of investment options, including mutual funds, annuity contracts, and insurance products. Plan participants can choose from a range of investment choices, including stocks, bonds, ETFs, REITs, and more.

Contribution Limits

For 2023, the contribution limit for 403(b) plans is $22,500 for employees under age 50. Employees age 50 and over can make an additional catch-up contribution of up to $6,500. However, some employers may offer additional catch-up provisions that allow employees to contribute even more.

Matching Contributions

Employers may choose to make matching contributions to their employees’ 403(b) plans. These contributions can help employees save more for retirement and may be subject to immediate vesting or a vesting schedule.

Withdrawals and Penalties

403(b) plan participants can generally begin taking penalty-free withdrawals at age 59 ½. However, early withdrawals may be subject to a tax penalty of 10% in addition to regular income taxes. Hardship withdrawals may also be available in certain circumstances.

ERISA Requirements

403(b) plans must comply with certain requirements under the Employee Retirement Income Security Act (ERISA), including annual reporting and disclosure requirements, fiduciary responsibilities, and prohibited transaction rules.

Plan Documents and Administrative Costs

403(b) plans must have written plan documents that outline the plan’s terms and conditions. Employers are responsible for ensuring that their plans are properly administered and may incur administrative costs associated with the plan.

Overall, 403(b) plans can be a valuable retirement savings tool for employees of tax-exempt organizations, public schools, and churches.

However, it is important to carefully consider the investment products offered and any associated fees before making contributions to a 403(b) plan.

Consulting with a financial advisor can also provide additional guidance on maximizing the tax benefits and investment performance of a 403(b) plan.



In conclusion, many types of employers can offer a 403(b) retirement plan to their employees. These include non-profit organizations such as schools, hospitals, and charities; religious organizations such as churches and synagogues; government entities such as state and local governments; and some small businesses with tax-exempt status.

It is important for employers to consider the needs of their employees when deciding whether to offer a 403(b) plan. For example, employees who are nearing retirement may be more interested in a plan with lower fees and more investment options, while younger employees may be more interested in a plan with a higher contribution limit.

Overall, a 403(b) plan can be a valuable benefit for employees and can help employers attract and retain top talent. Employers should consult with a financial advisor or retirement plan specialist to determine whether a 403(b) plan is right for their organization and how to best structure the plan to meet the needs of their employees.

Frequently Asked Questions

Here are some common questions about this topic.

Who is eligible for a 403(b) retirement plan?

403(b) plans are typically offered to employees of non-profit organizations, such as schools, hospitals, and religious organizations. However, some for-profit companies may also offer 403(b) plans to their employees.

How does a 403(b) plan differ from a 401(k) plan?

The main difference between a 403(b) plan and a 401(k) plan is the type of employer that offers them. 401(k) plans are offered by for-profit companies, while 403(b) plans are offered by non-profit organizations. Additionally, 403(b) plans may have different contribution limits and investment options compared to 401(k) plans.

What are the contribution limits for a 403(b) plan?

For 2023, the maximum contribution limit for a 403(b) plan is $19,500. Employees who are 50 years or older can make catch-up contributions of up to $6,500, bringing their total contribution limit to $26,000.

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