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4 tax facts for 403(b) plans

Read up on the tax facts you need to stay sharp and help employers get the most out of 403(b) tax sheltered annuities.

By Robert Bloink, William H. Byrnes | Updated on June 19, 2014

A tax sheltered annuity is a deferred tax arrangement expressly granted by Congress in IRC Section 403(b). An employee can exclude from his or her gross income, within limits, the contributions paid to an annuity for the employee’s retirement or amounts paid to a custodian for the purchase of stock in regulated investment companies. The plan may be used by only certain employers. An employee generally must report the payments received under the contract or custodial account as taxable income.

A plan must meet specific requirements (see below) although some but not all failures to meet these requirements may be subject to correction under the Employee Plans Compliance Resolution System (“EPCRS”).

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