What advantages does a 403(b) retirement plan have over an IRA?
A tax-sheltered annuity, or 403(b) plan, is a tax-deferred employee retirement plan that can be adopted only by certain tax-exempt private organizations and public schools and colleges. Employees are 100% vested in the plan and contribute only through salary reductions. A 403(b) plan boasts several features than can make it more attractive than an Individual Retirement Account (IRA). First, the ceiling for annual contributions can be as much as $10,500, which is much higher than the $2,000 limit for IRAs. Also, in plans of health, education or religious organizations, the 403(b) allows workers with 15 years of service to “make up” the years when they did not contribute their maximum through a catch-up provision. Beginning in 2002, an additional catch-up contribution of $1,000 will be allowed for workers age 50 and over. This catch-up will increase $1,000 each year after 2002 until reaching $5,000 in 2006. Finally, many tax-sheltered annuity plans allow participants to borrow from their
