If you work for a public school, a university, a hospital, a church, or another tax-exempt organization, your employer may offer a 403(b) plan instead of a 401(k). The two plans share many features, including high contribution limits and tax advantages, but the 403(b) has its own history and quirks, such as a special catch-up provision for long-time employees and a heavier reliance on annuity products. Knowing how your 403(b) works can help you avoid high fees and make the most of the plan. This guide explains who can use a 403(b), the 2026 contribution limits, investment choices, and how to evaluate your plan. Confirm details in your plan documents and on IRS.gov.
What a 403(b) plan is
A 403(b) plan, named for the section of the Internal Revenue Code that authorizes it, is a tax-advantaged retirement plan offered by:
- Public schools, colleges, and universities
- Tax-exempt organizations under Section 501(c)(3), such as hospitals, charities, and research groups
- Churches and certain church-related organizations
- Certain ministers
Employees contribute through payroll deductions. Many employers also contribute, through matching or nonelective contributions.
Traditional and Roth 403(b) contributions
Traditional 403(b)
Contributions are made before income tax, lowering your taxable income now. Investments grow tax-deferred, and withdrawals in retirement are taxed as ordinary income.
Roth 403(b)
If your plan offers it, Roth contributions are made with after-tax dollars. Qualified withdrawals, generally after age 59 1/2 and after the account has been open at least five years, are tax-free. Under the SECURE 2.0 Act, Roth accounts in workplace plans are no longer subject to required minimum distributions during the owner’s lifetime, starting in 2024.
2026 contribution limits
| Contribution type | 2026 limit |
|---|---|
| Employee elective deferral | $24,500 |
| Age 50+ catch-up | $8,000 |
| Age 60 to 63 catch-up | $11,250 instead of $8,000 |
| Total employee plus employer contributions | $72,000, not counting catch-ups |
The employee deferral limit applies to the combined total of your 403(b) and any 401(k) contributions in the same year. It does not apply jointly with a governmental 457(b) plan, which has its own separate limit. Some public school and government employees can contribute to both a 403(b) and a 457(b), effectively doubling their deferral room.
Roth catch-up rule for high earners
Under SECURE 2.0, employees whose prior-year FICA wages from the employer exceeded a threshold, indexed for inflation, must make catch-up contributions as Roth contributions starting in 2026, with IRS rules allowing plans a good-faith transition period. Check with your plan administrator about how this applies to you.
The 15-year catch-up provision
A unique 403(b) feature lets certain long-tenured employees contribute more. If you have at least 15 years of service with the same eligible employer, such as a public school system, hospital, or church, and your plan allows it, you may be able to contribute up to an additional $3,000 per year, with a lifetime maximum of $15,000. Eligibility depends on a formula based on your past contributions, and generally you cannot have averaged more than $5,000 per year in prior deferrals.
When both the 15-year catch-up and the age 50 catch-up apply, IRS ordering rules generally treat contributions above the regular limit as 15-year catch-ups first. Your plan administrator can calculate your available room.
Investment options
403(b) plans can hold two main types of investments:
- Annuity contracts from insurance companies, including fixed and variable annuities
- Custodial accounts invested in mutual funds
Historically, many 403(b) plans, particularly in public schools, were dominated by annuity products sold by multiple vendors, sometimes with high fees and surrender charges. Plans offered by universities and hospitals more often resemble 401(k) plans, with lineups of mutual funds, including low-cost index funds and target-date funds.
Watch the fees
High fees can significantly reduce long-term savings. Look for:
- Expense ratios on mutual funds
- Mortality and expense charges on variable annuities
- Surrender charges for withdrawing or transferring money within a certain number of years
- Administrative or record-keeping fees
- Advisory fees from sales representatives
Review your plan’s fee disclosures and compare vendors if your employer offers more than one. Low-cost index or target-date funds are often a good starting point.
ERISA and non-ERISA plans
Many private nonprofit 403(b) plans are subject to the Employee Retirement Income Security Act (ERISA), which requires fiduciary oversight, fee disclosures, and reporting. Plans offered by public schools, governments, and churches are generally exempt from ERISA. In non-ERISA plans, employees often must do more research on their own to evaluate vendors and fees.
Employer contributions and vesting
Employers may match part of your contributions or contribute a set percentage of pay. Employer contributions may be subject to a vesting schedule, meaning you must work for a certain period before you fully own them. Your own contributions are always 100% vested.
An example
Linda is a 52-year-old public school teacher with 18 years in the same district. She earns $70,000, and her district offers both a 403(b) and a 457(b). In 2026, she could defer $24,500 to her 403(b), plus the $8,000 age 50 catch-up, and potentially the 15-year catch-up if she qualifies under the formula. She could also defer up to $24,500 to the 457(b). In practice, few people can save that much from one salary, but the combination gives teachers like Linda unusual flexibility to catch up on retirement savings late in their careers, especially if a spouse’s income covers household expenses.
How a 403(b) interacts with a pension
Many public school teachers and government employees also earn a defined benefit pension. A 403(b) supplements that pension rather than replacing it. Because some teachers work in positions not covered by Social Security, personal savings in a 403(b) can be especially important. Check your state retirement system’s rules and estimate your pension before deciding how much to save.
Withdrawals and rules
- Age 59 1/2. Withdrawals before this age are generally subject to a 10% additional tax, plus income tax, unless an exception applies.
- Separation from service at 55 or older. If you leave your employer in or after the year you turn 55, you can generally withdraw from that employer’s plan without the 10% additional tax.
- Hardship withdrawals and loans. Many plans allow these under specific conditions.
- Required minimum distributions. RMDs generally begin at age 73 under current law for traditional balances. Some plans allow pre-1987 403(b) balances special treatment.
Rollovers
When you leave your job, you can usually leave the money in the plan, roll it into a new employer’s plan, or roll it into an IRA. Rolling into an IRA can give you broader, lower-cost investment choices. Be aware of surrender charges on annuity contracts before moving money, and use a direct rollover to avoid mandatory withholding.
403(b) vs. 401(k)
| Feature | 403(b) | 401(k) |
|---|---|---|
| Employers | Public schools, nonprofits, churches | For-profit companies, some nonprofits |
| Employee contribution limit | Same | Same |
| 15-year catch-up | Available in some plans | Not available |
| Investments | Annuities and mutual funds | Wide range of investments |
| ERISA coverage | Not for public schools or churches | Generally yes |
Tips for 403(b) savers
- Contribute at least enough to get the full employer match.
- Check fees and favor low-cost options.
- Consider a 457(b) if your employer offers one, for additional savings room.
- Use Roth contributions if you expect higher taxes in retirement.
- Review beneficiaries regularly.
- Avoid high-pressure sales pitches for annuities without understanding their costs and surrender schedules.
Related reading: Backdoor Roth IRA: Step-by-Step Rules, the Pro-Rata Trap, and Reporting on Form 8606.
Frequently Asked Questions
What is the 403(b) contribution limit for 2026?
Employees can defer up to $24,500 in 2026, plus an $8,000 catch-up at age 50 or older, or $11,250 for ages 60 to 63 if the plan allows.
Can I contribute to a 403(b) and a 457(b) at the same time?
Yes. If your employer offers both, the limits are separate, so you can contribute the maximum to each.
What is the 403(b) 15-year rule?
Employees with at least 15 years of service at the same eligible employer may contribute up to $3,000 extra per year, with a $15,000 lifetime limit, if the plan allows and they meet the formula.
Is a 403(b) better than a 401(k)?
They are similar. The type depends on your employer. A 403(b) may offer a special catch-up, but some plans have higher-cost annuity options, so check fees.
Can I roll a 403(b) into an IRA?
Yes. After leaving your job, you can generally roll your 403(b) into a traditional or Roth IRA, depending on the contribution type. Watch for surrender charges on annuities.
This article is for general informational purposes only and is not legal, medical, tax, or financial advice. Rules vary by state and change over time; confirm details with the relevant agency or a licensed professional.
