What Is a 403(b) Plan?
A 403(b) plan is a tax-advantaged retirement savings plan available to employees of public schools, universities, nonprofit organizations, hospitals, and churches. It functions similarly to a 401(k): contributions are made pre-tax (or Roth after-tax), grow tax-deferred, and are taxed as ordinary income upon withdrawal in retirement.
How 403(b) Differs from 401(k)
- 15-Year Catch-Up Rule: Employees with 15 or more years at the same eligible employer and historically low contributions may make additional contributions up to $3,000 per year (lifetime maximum $15,000) beyond standard catch-up limits.
- Non-ERISA Plans: Church and some governmental 403(b) plans are not subject to ERISA, meaning fewer federal protections but also less regulatory complexity.
- Annuity Products: Historically 403(b) plans relied heavily on insurance annuities. Many plans still default to higher-fee variable annuities, which is one key reason employees often consider rolling to a lower-cost IRA when changing jobs.
403(b) to IRA Rollover: When It Makes Sense
Rolling a 403(b) to an IRA often makes sense when your plan holds high-fee annuity products, you want access to lower-cost index funds, you are consolidating multiple retirement accounts, or you have left your employer and want more control over investments. The process is identical to a 401(k) rollover: elect a direct rollover and provide your IRA custodian details.
403(b) to 401(k): Rolling to a New Employer
If your new employer offers a 401(k) that accepts incoming rollovers, you can roll your 403(b) balance into it. Governmental 457(b) plans can also accept 403(b) rollovers and may offer added flexibility since governmental 457(b) plans have no early withdrawal penalty.
Frequently Asked Questions
Can teachers roll over a 403b to an IRA?
Yes. Teachers and school employees can roll a 403(b) to a Traditional IRA after leaving employment. The rollover is a non-taxable event when executed as a direct rollover. Most teachers find IRA providers offer significantly lower-cost investment options than their school district plans.
Are 403b plans protected from creditors?
ERISA-covered 403(b) plans at private nonprofits and hospitals have strong federal creditor protection including in bankruptcy. Non-ERISA governmental and church plans have state-law-dependent protection that varies considerably by state.
What is a 403b annuity?
An insurance contract inside a 403(b) plan. Fixed annuities offer a guaranteed interest rate while variable annuities invest in sub-accounts similar to mutual funds. They often carry surrender charges, mortality expenses, and administrative fees that significantly reduce returns compared to low-cost index funds available in IRAs.
Can I have both a 403b and 457b?
Yes, and this is one of the most underutilized advantages for eligible employees. These plans have completely separate contribution limits. In 2026, you can contribute $23,500 to each plan, potentially saving $47,000 or more annually in tax-advantaged accounts.
How are 403b withdrawals taxed?
Traditional 403(b) withdrawals are taxed as ordinary income, identical to traditional 401(k) withdrawals. Roth 403(b) qualified withdrawals (account open 5 or more years, age 59.5 or older) are completely tax-free. Early withdrawals before 59.5 face the 10% penalty with the same exceptions that apply to 401(k) plans.
Content by Alex Porter | Updated April 2026 | Educational purposes only