What Is a 403(b) Plan?

A 403(b) plan is a tax-advantaged retirement savings plan available to employees of public schools, nonprofit organizations, hospitals, churches, and certain other tax-exempt entities — it functions much like a 401(k) in terms of how contributions, matching, and tax treatment work. Employees contribute pre-tax dollars (or after-tax for Roth 403(b) contributions), reducing their current taxable income, and the money grows tax-deferred until withdrawn in retirement. In 2024, the contribution limit is $23,000 ($30,500 for those 50 and older), the same as 401(k) plans. One feature unique to 403(b) plans is the "15-year rule" that allows certain long-tenured employees to contribute an extra $3,000 per year above the normal limit, up to a lifetime maximum of $15,000. Historically, 403(b) plans had more limited investment options — often only annuities — but modern plans increasingly offer mutual funds and other investment choices. For employees of nonprofits and schools, the 403(b) is the primary workplace retirement savings vehicle.