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Retirement
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Retirement
403b
Approved 403(b) Definitions
403(b) Definitions
What is a 403(b)
Of the many IRS rules and regulations governing 403(b) plans,
there are a few fundamental principles:
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The amount that can be contributed in pre-tax dollars
to 403(b) retirement plans (employer and salary reduction
combined) is limited by both an overall maximum and
your income.
Even if an employer's retirement plan allows cash withdrawals,
you can't take distributions of salary reduction to
annuity or any 403(b)(7) contribution to a mutual fund
before age 59˝ as long as you’re still working for that
employer. If you leave your employer and take distributions
before 55, you may be subject to an additional 10 percent
tax penalty in addition to regular income taxes.
Most people in 403(b) retirement and Tax Deferred Annuity
plans must start receiving minimum distributions by
the April 1st following the year they turn 70˝ or retire,
whichever is later. 403(b) funds accumulated prior to
1987 aren't subject to mandatory federal minimum distribution
rules, but are subject to other distribution requirements.
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What's a 403(b)(7) Plan?
Created as part of a comprehensive revision of the laws covering
ERISA retirement plans, 403(b)(7)s expand the original 403(b)
concept by allowing employees to make contributions to custodial
accounts invested in mutual funds, yet have the investment
treated the same as if it had been made to an annuity contract.
As a result, if you make 403(b)(7) contributions you may exclude
them from their gross income for federal (and most state)
tax purposes.
Section 403(b)(7) also makes an exception to the 403(b) rule
that requires contributions be made to an annuity purchased
from an insurance company. But the exception applies only
when the mutual fund investments are held in qualifying custodial
accounts.
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