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403b Salary Deferral Plan


If you save in the Traditional 403(b) plan, your contributions and any growth, dividends, or earned interest will accumulate tax deferred until you withdraw funds, usually at retirement. Then income is taxed only as funds are withdrawn and generally taxed as ordinary income. You can make contributions to a 403(b) plan only by a salary reduction agreement with your employer. The amount you save or invest in the plan is called an elective deferral. With a Traditional 403(b), the amount you contribute is deducted from your paycheck before taxes are taken out by your employer. The money is then forwarded to the custodial investment firm that manages your money.


Universal availability

  • All employees are eligible to participate in the 403b Plan and eligibility to participate begins on the date of hire
  • The Universal Availability rule is designed to ensure that employees understand their eligibility and are aware of the benefit in a consistent manner. Effective opportunity to participate must be given annually. Some examples of this communication include information websites written communication, group meetings or new employee kits.


What types of contributions can be made to this plan?

This plan provides for pre-tax salary reduction contributions and rollovers. There are no employer contributions.

  • Pre-tax contributions are deducted before you pay current income taxes. Pre-tax investments grow tax-deferred and the contributions and any earnings are taxed when you take a distribution from this plan.
  • You may rollover benefits from a former employer’s eligible retirement plan into this plan.

How much may I contribute?

You can contribute up to 100% of your compensation to this plan up to the limit allowed under the Internal Revenue Code ($18,000 in 2015).

  • If you have 15 years of service with your employer, you may be eligible to make additional contributions of up to $3,000 per year (capped at $15,000 for all years). If you are age 50 or older you can contribute a “catch-up” contribution of up to $6,000.00 (2015).

Can I ever lose my benefits?

No, you are always 100% vested in your salary reduction contributions. This means the value of your contributions and earnings are yours when you terminate employment with your employer, without respect to your years of service.

Loans, Distributions and Transfer/Exchanges/Rollovers

When can I take a distribution from this plan? Generally, you may request a distribution when you reach retirement age, terminate your employment with the employer, or become disabled. A qualifying event is required to permit distribution of your account balance.

403b Plan Qualifying Events:

  • Attainment of age 59 ½
  • Severance from employment
  • Total and permanent disability
  • A participant that is a reserve member of a U.S. military service who is called to active duty for six months or more (qualified reservist).
  • Death
  • Plan termination
  • Hardship (special requirements apply)

Can I get money from the plan while I am still employed?

Depending on the provisions of the custodial account or annuity contract you select to hold your contributions, certain other distributions may be allowed, such as Hardship withdrawals for certain financial emergencies; In-Service withdrawals if you are at least 59 ½ years old; and Loans.

Will I be taxed on my distribution?

  • Because Traditional 403b contributions are pre-tax, distributions are included in your gross income. Your actual tax liability will be determined based on your personal income tax return; however, you are required to withhold a mandatory 20% federal and 5% state tax as an estimate of your actual tax liability. Some distributions, such as hardship withdrawals, cannot be rolled over, and will therefore be subject to income taxation.

Can I exchange/transfer/rollover my accounts to a new custodial account or annuity contract?

  • You may exchange your account, tax-free, to any approved investment providers and 403(b) investment products under this plan. Certain charges may apply. If you terminate employment you may transfer your account, tax-free, to another accepting 403b plan at your new employer. If you meet a qualifying event for distribution, you may rollover your account, tax-free, to another tax qualified retirement plan or Individual Retirement Account (IRA). (Some distributions, such as hardship withdrawals, cannot be rolled over, and will therefore be subject to income taxation.)