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What is a 403(b)?
A 403(b) is an employer sponsored retirement savings plan that allows you to save pre-tax dollars for your retirement.
A Roth 403(b) permits only after-tax contributions but allows you to diversify your tax risk by letting eligible participants make tax-free withdrawals after retirement.
The IRS limits the amount you can contribute each year
Participants can contribute up to $17,500 for 2013. This limit is applicable if you're under age 50 as of December 31st (referred to as the "elective deferral amount")
Participants who are 50 or older any time during the calendar year can contribute an additional $5,500. That means you can contribute up to $23,000 if you're age 50 or older (referred to as "catch-up contributions")*
Up to 100% of your includable compensation** (if less than the elective deferral limit)
*An additional catch-up may be available if you are an eligible employee and have at least 15 years of service. The actual amounts may vary based on your employers specific plan design.
**Includable compensation is your gross compensation less any pre-tax deductions.
A plan that includes both employer contributions and employee elective deferrals is subject to both the elective deferral limit, and the limit on annual additions.
For 2013, the total of employer and employee contributions cannot exceed the lesser of $51,000 for 2013 or 100% of includ compensation, plus any age 50 catch-up contributions.
Employees with 15 years of service with their current employer and an annual average contribution of less than $5,000 per year are eligible for an additional $3,000 contribution per year up to a lifetime maximum catch up of $15,000. This is known as the 15-year rule.
For participants eligible for both the age 50 catch-up and the 15-year rule, the IRS will apply contributions above the regular limit first to the 15-year rule. Employers are not required to make this provision available.