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About 403(b)
What is a
403(b) plan?
A 403(b) plan
is a tax-deferred (pre-tax) retirement savings plan made available
to employees of governmental and certain non-profit organizations.
Contributions to the plan are invested in mutual funds, bond funds,
annuities, or other investment vehicles and grow tax free until
withdrawn.
Contribution
Amounts
You are
limited to the amount you may contribute to the 403(b) plan each
year. Generally, you may contribute up to $16,500* per year.
However, various “catch-up” options may allow you to contribute more
than $16,500*. If you are over age 50 you may contribute an
additional $5,500*. There is also a catch-up option available to
employees with at least 15 years of service with their current
employer. The 15-years of service catch-up could enable you to
contribute up to $3,000* additional per year up to a maximum of 5
years.
Your employer
may also elect to make 403(b) contributions on your behalf. Your
combined employee and employer contributions may not exceed the
lesser of $46,000* or 100% of your compensation.
Transferring
Funds
The funds in
your 403(b) plan may be transferred to any approved 403(b) vendor that
is offered by your employer at any time and for any reason.
Withdrawing
Funds
The following
are events that will allow you to withdraw funds from your account
and either receive the money directly or rollover the money to a
different retirement plan:
·
Termination of employment from your current employer
·
Retirement
·
Attainment of age 59 ½
·
Disability
·
Death
·
Financial hardship
However,
certain tax penalties may apply when money is withdrawn prior to age
59 ½. Consult with your FBC financial advisor about your options.
Direct
withdrawals may generally be made in the form of a lump sum
distribution or in an annuity payment.
Loans may also
be taken from your 403(b) plan. Consult with your FBC
retirement specialist for additional details.
Interaction
with 457(b) Plan
To learn more
about 457(b) Plans click
here.
You may
contribute to both the 457(b) and 403(b) plans concurrently.
Therefore, if you desire to maximize your tax deferred savings
opportunities you may wish to contribute to both plans. Each plan
has separate $16,500* base contribution limitations (which may be
higher if you qualify for certain catch-up provisions).
Differences
between the 403(b) Plan and the 457(b) Plan
For detailed
information about 457(b) plans click
here.
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403(b) |
457(b) |
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·
Withdrawing funds prior to age 59 ½ incurs a 10% early
withdrawal penalty levied by the IRS. |
·
No 10%
penalty for early withdrawal. |
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·
Attainment of age 59 ½ qualifies as a distributable event
that permits you to withdraw funds from your account. |
·
Attainment of age 59 ½ does not qualify as a distributable
event. |
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There
are many vendors who offer 403(b) plans within your
district. |
·
The
FBC Plan
may be the only 457(b) option within your district. |
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·
403(b)
plans may permit you to exceed the $16,500* annual
contribution limit if you have at least 15 years of service
with our current employer. |
·
No 15
years of service catch-up option. |
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·
No
catch-up for entering your final 3 years of services of
service prior to retirement. |
·
457(b)
plans may allow you to exceed the $16,500* annual
contribution limit if you are entering your final 3 years of
employment prior to retirement. |
*2009 figures
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