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403(a) vs. 403(b) plans....?


Guest JJB12
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Guest JJB12

Could somebody please shed some light on the differences between the two types of plans?

It is my understanding that 403(a) plans are "qualified" plans funded through annuity contracts purchased by the employer for the employees, and that 403(b) plans are not considered "qualified," can only be sponsored by an eligible employer (i.e., 501©(3)) and can fund the plan through custodial accounts or annuity contracts.

I'm not finding any detailed information providing me with the major differences. Thank you in advance.

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A 403(a) plan is a qualified plan which is funded through a group annuity contract issued to the employer instead of a trust. Otherwise it must meet all the requirements of a qualified plan. A 403(b) plan has no assets held by a fiduciary. The funds are kept in an annuity contract or custodial account in the name of the employee. See IRS pub 560 P 11- 20 rules for qualified plans and IRS pub 571 for description of 403(b) plans. Also see instructions to 5500 form for exemption of employee salary reduction only 403(b) plans from ERISA.

mjb

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You might visit Carol Calhoun's website at www.benefitsattorney.com

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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