403(b) Plan

What does it mean?
A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations and certain ministers. Individual accounts in a 403(b) plan can be any of the following types:
- An annuity contract, which is provided through an insurance company,
- A custodial account, which is invested in mutual funds or
- A retirement income account set up for church employees.
Generally, retirement income accounts can invest in either annuities or mutual funds.

In Other Words...
The features of the 403(b) plan are very similar to the 401(k) plan. Employees may make salary deferral contributions that are usually limited by regulatory caps.

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Related Terms
401K Plan | 457 Plan | Custodial Account | Pension Plan

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