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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

  • In 2019, you can contribute up to $19,000.  This limit is applicable if you're under age 50 as of December 31st (referred to as the "elective deferral amount").  

  • In 2019, if you are 50 or older any time during the calendar year you can contribute an additional $6,000.  That means you can contribute up to $25,000 in 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)


For those with employer matches or other employer contributions, the limit is $56,000 or 100% of compensation (whichever is less). That means that you can contribute up to $19,000 ($25,000 if you're over 50) and an employer can add up to another $37,000.  

*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.

15-Year Rule

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.

 

Defined Contribution Plan Limits
For 401(k), 403(b) and most 457 plans
2019
Maximum employee elective deferral limit $ 19,000
Employee catch-up contribution (ages 50 and older) $   6,000
Defined contribution maximum limit, all sources $ 56,000
Defined contribution maximum limit (ages 50 and older) $ 62,000
Employee compensation limit for calculating contributions $280,000