Introduction to 403(b) Plans

The 403(b) plan, named for section 403(b) of the Internal Revenue Code, is a type of retirement plan that is eligible to receive special tax benefits. The money contributed to a 403(b) comes from before-tax dollars. These dollars are deducted from one’s paycheck before they are taxed. Thus, job earnings you contribute to one of these retirement plans are not taxed while they remain in the fund (although how much may be contributed tax-free is limited).

The official name of the 403(b) is tax-deferred annuity plan. The name is somewhat misleading, as either annuity contracts or mutual funds may be used to fund it.