403(b) Plans

Description
A 403(b) retirement plan is designed for employees of public schools, churches and certain non-profit organizations. It allows employees to make pretax salary deferrals of up to $16,500 (2010), $22,000 (if age 50 or older with $5,500 catch-up contribution) or 100% of compensation, whichever is less.

Objective
This plan allows employees to save for retirement tax-deferred while reducing their taxable income. If the plan allows for Roth contributions, employees can designate part or all of their salary deferrals as after-tax Roth contributions.

Features

Tax Advantages - Employees can defer up to $16,500 (2010), $22,000 (if age 50 or older) of salary per year. For certain employees, there may be other available options for catch-up contributions.
Contributions – Some employers may choose to make contributions to their employees' account.
Roth Contributions - If the plan offers the Roth option in a 403(b), employees can designate part or all of their 403(b) contribution as Roth after-tax dollars. If certain requirements are met, the Roth distributions from an employee's 403(b) account may be tax-free.

Roth 403(b) contributions are like a Roth IRA with a couple key differences. First, the dollar contribution limit is much higher than the Roth IRA. Second, employees may not be able to contribute to a Roth IRA if their income is above a certain limit. However, there are no income limits to contribute to a Roth 403(b).
Additional Information - Public schools and colleges may offer both a 403(b) and a 457(b) plan.

For more information, please contact your local Edward Jones financial advisor.

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