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403 B

What is 403(b)?

403 B is a retirement plan for employees that are available to the educational institutions’ employees working in the public sector(s), and some non for profit employers for their employees. This is a tax privileged retirement saving arrangement for employees by employers. The plan offers universally all employees to participate unless it is exempted for a few. Usually, the employees who even work 20 hours per week (part timers) are also allowed to include in.

Legal Status

As per US Law, Internal Revenue Code sub-Section 403B, a plan of government namely 403B is for the employees of and/or under the United States, US agency, or its instrumentality, established by the employer.

Employer Perspective:

In a 403B retirement plan for the employees by the employer, this works as the competent employee retention tool for the employer(s). As the human resource is the most inimitable capital of any business concern, therefore retirement plans work for investing into the careers of the people, hence long term services fetched. The employee is allowed to withdraw the amount(s) at the age of 59.5 years old; in some circumstances without penalties before that age.

Employee Perspective:

This is faster vesting of funds (as compared with the 401k plan) and a tax deferred investment plan for retirement. It has the ability for more catch-up contributions. The catch-up contributions are defined as the fifty years (50years) older and above aged employees who can make more contributions to their 401K and IRAs. Whereas IRAs are Individual Retirement Accounts which are actually saving accounts for retirement age purposes wherein the employees can invest and save for their long term.

Related: 401(k), 401(a)