A 403(b) is a retirement savings plan available to employees of public institutions or organizations, nonprofit hospitals, churches, and charities. It is a tax-exempt plan that allows employees to save for retirement through pre-tax and Roth contributions.
403(b) was initially known as a Tax-Sheltered Annuity (TSA), and participants could only purchase annuities through the plan. However, it has evolved to include mutual funds and other investment options over the years.
403(b) operates similarly to the 401(k) plans offered to employers of private institutions. Just like the 401(k), untaxed payroll deductions are deposited from contributions into a 403(b) and are left to grow tax-free until you withdraw them in retirement. Withdrawals from a 403(b) are subject to regular income tax.
403(b) contribution limits in 2024
The 2024 limit on elective salary deferrals is $23,000 for pre-tax and Roth employee contributions. An elective salary deferral is the most an employee can contribute to a 403(b) account from their salary.
If you contribute to both a Roth account and a traditional 403(b), your contribution limit carries across both accounts. This means that employees with a Roth and a traditional 403(b) account must have a total of $23,000 in both accounts if catch-up contributions are not available for you.
Apart from 403(b), other accounts considered in this contribution limit are 401(k), SARSEP IRA, and SIMPLE IRA plans.
Employer and employee contributions
The limit for employer contributions and employee elective salary deferrals in 2024 is $69,000, or 100% of all includible compensation for the employee’s most recent year of work.
Catch-up contributions for employees with long years of service
Long-term employees who have served at least 15 years with the same employer may be eligible to save more in 403(b). However, this depends on your specific 403(b) plan, as certain plan limitations may not allow it.
If your 403(b) plan permits, and you meet the 15-year service requirement, you may:
- have a 403(b) elective deferral limit that is increased by $3,000. This means that you may be allowed an additional catch-up contribution every year.
- save up the additional $3,000 each year until you reach the total lifetime contribution limit of $15,000
Catch-up contributions for employees 50 years of age and older
Employees who are 50 and over by the end of the year can make catch-up contributions of $7500 if permitted by the 403(b) plan, bringing their total contributions limit to $30,500.
However, your total contributions must be less than your yearly earnings at the employer that offers your plan.
If both catch-up opportunities are available to you
If you are up to age 50 and have served a 15-year service period, the law requires that deferrals exceeding the standard limit of $23,000 be applied to the long service catch-up, and then to the age 50 catch-up.
