A 403(B) retirement account is also known as a tax-sheltered annuity plan (TSA), cites the IRS. This plan provides a retirement account for those eligible employees working for qualified tax-exempt organization, approved ministers and/or eligible employees working for public schools, cites J.K. Lasser. It is a heavily regulated area with strict punitive damages assessed for noncompliance with its regulations and rules.
Employee Eligibility
One important IRS regulation involves which types of employees are eligible to participate in the 403(B) plan. The IRS states any employee who meets eligibility requirements can participate in the retirement plan. According to the IRS, eligible employees need to be employed by a tax-exempt organization "established under section 503 (c)(3) of the Internal Revenue Code." These organizations are involved in nonprofit operations by nature. Eligible employees include those employed by any of what is known as "cooperative hospital service organizations." Employees involved with the daily operations of a public school system may be eligible. If the public school system is organized by tribal governments, the involved employees may be eligible to participate in the plan. Finally, those working as civilian staff and faculty of the USUHS (Uniformed Services University of the Health Sciences) may be considered eligible employees.
Minister Eligibility
Ministers have two major IRS regulations in place regarding plan eligibility that must be met prior to participating in the plan. The minister must fall under one of the two categories to be eligible for participation in the plan. First, self-employed ministers must work for, or with, an IRS-approved tax-exempt organization. If you are a self-employed minister, you are treated as an employee of the qualified employer. The other regulation involves ministers who are not self-employed. According to the IRS, this two-part regulation states that the minister must perform ministerial duties while performing daily professional responsibilities for their employers. Secondly, the minister must be not be working for a section 501(c)(3) organization (they are not considered an employee).
Types of Accounts
In its Publication 571 (Tax-Sheltered Annuity Plans (403(B) Plans)), the IRS stipulates which types of accounts can participate in this form of retirement account. These eligible accounts include a contract "provided through an insurance company," otherwise known as an annuity contract. Another type of eligible account involves one that includes investing in mutual funds. This type of account is known as a custodial account. Thirdly, the retirement account can be set up for the benefit of church employees cites the IRS. The retirement account for church employees may include investing either mutual funds or annuities.
Account Set-Up
According to the IRS, there is a regulation in place regarding who can set up your 403(b) retirement plan account. You are not authorized to set up your own account. This responsibility rests with only your employer. Even a self-employed minister is not able to set up their own retirement account. This also must be done by the organization the minister provides services to.
References
- J.K. Lasser's Your Income Tax 2009; Barbara Weltman; 2008
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