A 403b retirement plan is for employees of public schools, ministers and tax-exempt organizations. Eligible employees can set up and maintain an individual 403(b) plan. There are three basic types of 403(b) retirement plans, and employers determine which financial institution maintains the plan.

Before you decide to set up one of these plans, you'll want to learn some information about them using 403(b) plans education and training. Consider is 403b information as part of your education:

1. Find basic information about 403b retirement plans.

2. Find out about types of 403b retirement plans.

3. Find out what kinds of contributions you can make to your 403(b) plan.

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Learn basic information about 403b retirement plans

Before you choose and enroll in a 403b retirement plan, you'll want to find educational information explaining what they are, how they work and how they benefit you. And after you sign up for a 403b plan, you'll want to keep updated on information about your plan and 403b plans in general.

I recommend: Begin your education with Investopedia, a website that provides a lot of information on what 403b retirement plans are, how they work and what the eligibility requirements are. 403(b)wise provides additional educational information on 403b retirement plans for participants, employers and advisers.

Learn about the different types of 403b retirement plans

You can continue your education and training by understanding the three basic types of 403b retirement plans: an annuity contract provided through an insurance company; a mutual fund, or custodial account, with limited investment companies; and retirement income accounts, which allow you to choose investments from either annuities or mutual funds.

I recommend: First Capital Management teaches you how to pick from the different 403(b) plans available. The U.S. Securities and Exchange Commission website provides definitions of different 403b plans, questions to ask yourself when choosing the type to choose from and contacts that can provide you with more information.

Learn about the different contributions for your 403(b) plans

There are different types of contributions that you can add to 403(b) plans. An important part of your training is education about what types of contributions are available and how you can make them.

I recommend: Carruth Compliance Consulting teaches you the different types of contributions that can be part of your 403(b) plan. TIAA-CREF explains how you make contributions to your 403(b) plan.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  You can also research information on a 403(b) insurance plan.

403(b) plans are retirement plans for people employed by not for profit organizations. Offering a retirement plan is a good way to encourage employees to stay with your company and increase job satisfaction.

403 retirement plans are relatively simple to set up, and, once established, you can arrange for the financial services company to manage them. The process of establishing a 403(b) plan involves several simple steps.

1. The employer's governing board authorizes the creation of a 403 b retirement plan. It also agrees on an investment provider.

2. The human resources department or payroll department reviews the payroll process and makes sure that it has the technology necessary to allow for proper deductions and contributions.

3. Notify employees about the 403(b) plans. Strict rules ensure that your company follows non-discrimination rules.

4. Employees review the 403(b) information from investment providers and sign up.

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Determine that your nonprofit is eligible for 403(b) retirement plans

403(b) plans can be established as retirement accounts for employees of public and private schools, colleges and universities, charities, religious groups and other non-profits.

I recommend: Check with the IRS for eligibility requirements before setting up a 403(b) plan.

Understand the rules for 403(b) savings plans

403(b) plans, once established, are open to everyone in your organization. The term for this is universal availability. There are a few exceptions. Students, part-time employees, employees who have a collective bargaining agreement and non-resident aliens are all exceptions to the universal availability clause.

I recommend: The number of employees covered in 403(b) plans determines the cost. Your 403 retirement plan must remain in compliance with IRS regulations. Problems with the organization's retirement plan can adversely affect 501(c)3 status. Lincoln Investment Planning offers a guide to universal eligibility for 403(b) accounts.

File the paperwork for your 403(b) accounts

403b plans do require extra work on the employers part, but properly managed, it is minimal. While some organizations choose to manage their employees retirement plans in-house, it makes more sense to allow the financial services company to handle this chore. This way, each employee can choose their investment vehicle, without putting addition pressure on the employer's payroll staff. The employer must also indicate on the employee's W-2 that the employee is participating in a 403b plan, the amount of deferral, and also check mark the box that states the employee is participating in a pension plan.

I recommend: Companies such as Sterling Trust allow your employees to make contributions to 403(b) accounts through them. They will also help each employee with investment choices. Once you have completed the initial set-up of the 403(b) retirement plan, you will have little extra paperwork to complete.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Once you decide to establish a 403b retirement plan for your employees, determine if your organization will contribute to it, and if so, how much.
• •  Particularly for smaller non-profits with few employees, choose a financial planning services that will handle contributions and paperwork for you.
• •  Plan annual meetings to discuss 403b information with your employees. Ask a representative from your financial services company to visit to explain a 403 plan, the benefits, and the different investment vehicles available.

The 403(b) plan, sometimes called a tax-deferred annuity (TDA) or a tax-sheltered annuity (TSA), is very similar to the better-known 401(k) retirement investment plan. It is designed to allow certain employees of public schools, tax-exempt organizations and ministers to save for retirement through tax-deferred salary contributions. It's a good idea to familiarize yourself with the terms that follow so you'll be "in the know" on the topic, whether as an employee planning for retirement or an employer seeking a worthwhile plan for your employees.

Action Steps
The best contacts and resources to help you get it done

Universal availability

The universal availability rule, enacted by the IRS, states that employers who allow one employee to participate in the 403(b) plan must extend the same offer to all of its eligible employees.

I recommend: The universal availability rule has exceptions and exclusions that require employers to be extra careful with administration and compliance, as outlined by Lincoln Investment Planning.

90-24 transfer

It used to be that 403(b) plan participants who weren't happy with their employer's provider or vendor list could perform a 90-24 transfer to the vendor of their choice-as long as the employer and its existing vendor gave the go-ahead. However, the IRS announced the end to such transfers, effective January 1, 2009.

I recommend: Changes to and rulings on the 90-24 transfer are discussed in-depth on the IRS website.

Written plan

Unlike other plans, 403(b) plans to date have not been required to be documented in writing by the employer. However, effective December 31, 2009, 403(b) plan sponsors must have a written document containing all material terms of the plan arrangement, including eligibility for participation, the types of contributions permitted and other pertinent information.

I recommend: A document at Littler outlines the new written plan rules and details exactly what terms and conditions the written plan must cover.

Elective deferrals

403(b) plan contributions are typically made via elective deferrals. Participating employees sign an agreement giving permission to put a specified amount of each paycheck into the 403(b) plan.

I recommend: Take a look at the 403(b) contribution calculator at Fidelity Investments, which explains the whats and whys of elective deferrals, and much more.

Maximum amount contributable

The maximum amount contributable (MAC), formerly called the exclusion allowance, is the maximum amount of money that can be put into an individual's 403(b) plan each year. The IRS has formulas that help compute an individual's MAC.

I recommend: National Benefit Services further explains the maximum amount contributable and also explains "catch up" contributions.

Vendor list

Employers who offer the 403(b) plan should compile a vendor list so their employee participants can select which investment companies they want to manage their 403(b) contributions.

I recommend: Check out the guide to selecting 403(b) plan vendors on 403bwise.com. The two-page guide, issued by The Spark Institute, is designed to facilitate and simplify the vendor selection process.