A 403(b) plan, also known as a Tax-Sheltered Annuity (TSA) or a Tax-Deferred Annuity (TDA), is a retirement investment plan designed for employees of specific nonprofit organizations. This plan is primarily utilized by certain public school employees, as well as workers in other tax-exempt entities. Eligible participants can include teachers, school administrators, professors, government employees, nurses, doctors, and librarians.
In a traditional 403(b) plan, employees can contribute a portion of their pre-tax income to the plan for investment purposes. This allows for tax deferral on contributions and earnings until withdrawals are made during retirement. In some cases, the employer may also offer a matching contribution, either in part or in full, to supplement the employee’s retirement savings. The 403(b) plan serves as a valuable retirement savings tool for individuals in the nonprofit sector.