403(b) / 403b Definition

A 403(b) plan is similar to a 401(k) plan [definition of 401k] in broad detail, except that it is available for public education organizations, some non-profit organizations and self-employed ministers. In general, a 403b is an employer-sponsored, defined contribution, retirement plan. It is named after the section of the IRS code which defines the plan. The savings plan allows workers to save for retirement by making tax-deferred contributions.

Usually, the contributions are withheld from the paycheck, and can be matched in part or in whole by the employer. Employer matching funds are subject so some period of vesting. In general, taxes are paid on a 403(b) plan as funds are withdrawn at or after retirement. Funds may be withdrawn prior to retirement, but when this is done the disbursement usually is subject to penalties and full taxation.