NBS 403(b) Plan Information Portal

A 403(b) plan, also known as a Tax-Sheltered Annuity (TSA) plan, is a retirement plan for employees of certain tax-exempt organizations such as your employer. Individual accounts in a 403(b) plan can be one of the following types:

Annuity contract, which is a contract provided through an insurance company
Custodial account, which is an account invested in mutual funds

Benefits

There are three benefits to participating ina 403(b) plan:

1. You do not pay tax on allowable contributions in the year they are made. You do pay tax on allowable contributions until you begin making withdrawals form the plan, usually after you retire. Allowable contributions to a 403(b) plan are either excluded or deducted from your income.
2. Earnings and gains on amounts in your 403(b) account are not taxed until you withdraw them.
3. If you make eligible contributions to a retirement plan, you may be able to receive a tax credit which could reduce the federal income tax you pay. (Please refer to IRS Publication 571 on the IRS Publications page for additional details.)

Contributions

Only your employer can make contributions to your 403(b) account. These contributions are made under a salary reduction agreement. This agreement allows your employer to withhold money from your paycheck to be contributed directly into a 403(b) account for your benefit.

Tax Reporting

Generally, you do not report contributions to your 403(b) plan account on your tax return. Your employer will report contributions on your Form W-2.

Maximum Allowable Contribution

Your Maximum Allowable Contribution (MAC) is the maximum amount you may contribute to your 403(b) plan during a given year. Your limit may vary from year-to-year based on changes made by the IRS and changes to your personal circumstances. We encourage you to complete MAC Worksheet every year to ensure you do not exceed your annual contribution limitation (found on your employer's forms page).

In 2008, the base contribution limit is $15,500. You may be able to contribute more if you qualify for one of several catch-up’s (see below). If you qualify for the full amount of both catch-up's, you may be able to contribute up to $23,500 in 2008.

If you will have attained age 50 by December 31, 2008, you will be able to contribute an additional $5,000 to your 403(b). Also, if you have completed at least 15 years of service with your employer and your lifetime 403(b) contributions have averaged less than $5,000 per year, you may be eligible to contribute an additional $3,000 in 2008.

If you exceed your annual contribution limit, taxes and additional IRS penalties may apply. Be sure you know and remain below your limit.

Distributions, Rollovers, and Transfers

Generally, a distribution from a 403(b) account may not happen until you meet a distributable event. Distributable events include:

Attainment of age 59 1/2
Termination of employment with your employer
Becoming disabled
Financial hardship
Death

In most cases, the payments you receive taxable as ordinary income. After you attain age 70 1/2, you may be required to take a minimum distribution from your 403(b) plan account each year.

You may generally rollover tax free all, or any part, of a distribution from a 403(b) plan to an IRA or an eligible retirement plan. (Distributions made due to financial hardship are not rollover eligible.)

You may be able to transfer all or part of your interest from a 403(b) account to another 403(b) account tax free and without having met a distributable event. The receiving 403(b) account must be subject to the same or stricter distribution restrictions. You may also be eligible to transfer money from your 403(b) plan account to a defined benefit governmental plan. Consult your agent or Investment Provider regarding the availability of transfers.

Always consult with your agent or Investment Provider to understand the tax consequences and account specific fees associated with a distribution, rollover, or transfer.

In the past, transactions such as distributions, rollovers, hardship withdrawals, loans, and transfers were generally accomplished through your investment provider without any involvement from your employer. However, new IRS regulations now require your employer and your investment provider to share certain information and to coordinate when performing these transactions. A transaction authorization process is utilized in order to facilitate necessary coordination and information sharing. If you wish to perform a distribution, rollover, hardship withdrawal, loan, or transfer; your investment provider must receive authorization from your employer's third party administrator, National Benefit Services (NBS). Authorization is obtained through submission of an Authorization Form (available on your employer's forms page). Please note that in addition to the Authorization Form, your investment provider will likely still require submission of its own paperwork. Contact your investment provider for additional information.

Recent Plan Changes - New Final IRS 403(b) Regulations

In 2007, the IRS released the first comprehensive 403(b) regulations in over 40 years. These new regulations have had far reaching impact on 403(b) plans. Please select the New 403(b) Regulations link to learn more.