Publication 571 - Tax-Sheltered Annuity Plans (403(b) Plans)

Publication 571– Tax-Sheltered Annuity Plans (403(b) Plans), is an IRS resource designed to help employees working in public schools and certain tax-exempt organizations understand the rules and benefits associated with their 403(b) retirement savings plans.

This publication is a valuable tool for anyone who participates in a 403(b) plan, helping them understand:

• Contribution limits: How much you can contribute to your 403(b) plan each year.
• Tax benefits: How contributions and earnings within the plan grow tax-deferred.
• Distributions: When and how you can withdraw your money from the plan and the tax implications of those withdrawals.
• Rollovers: Moving your 403(b) funds to another qualified retirement plan.
• Other important details: Retirement savings credit, excess contributions, and general plan rules.

Who Needs Publication 571?

This publication is most relevant to the following individuals:

• Employees of public schools: Teachers, administrators, and other staff working in public K-12 schools.
• Employees of certain tax-exempt organizations: This includes non-profit organizations, charities, and religious institutions.
• Ministers: Certain religious ministers can also participate in 403(b) plans.

Can I rollover funds from another retirement plan into my 403(b)?

Yes, under certain conditions, you can rollover funds from other qualified retirement plans into your 403(b) account.

What happens if I take money out of my 403(b) plan before retirement?

Generally, early distributions are subject to income taxes and a 10% additional tax penalty. However, there are some exceptions, such as for qualified medical expenses or certain emergency situations.

How much can I contribute to my 403(b) plan?

The IRS sets annual contribution limits for 403(b) plans. As of 2024, the limit is $22,500 for individuals under 50 and $30,000 for those 50 or older (catch-up contribution). Pub 571 explains these limits and any special rules that may apply.

What types of investments can I choose from in my 403(b) plan?

While traditionally invested in annuities, 403(b) plans today offer a variety of investment options, including mutual funds, ETFs, and age-appropriate target date funds. Your employer will determine the specific investment options available in your plan.