| A 403(b) plan, often called a tax-sheltered annuity | | | | invest in either annuities or mutual funds. |
| (TSA), is a retirement plan for certain employees of | | | | |
| public schools, tax-exempt organizations, and certain | | | | Generally, the maximum amount contributable (MAC) |
| ministers. It is very likely that an enrolled agent will one | | | | to a 403(b) account is limited to the lesser of: |
| day prepare a tax return or offer tax advice to a | | | | - The annual additions limit - For 2009 the limit is |
| client with a 403(b) plan. Our enrolled agent course | | | | $49,000 or 100% of compensation for the most recent |
| does not cover these plans in detail as the rules have | | | | year, whichever is less. |
| not been heavily tested in past ea exam questions. As | | | | - The elective deferral limit - In general, an employee |
| 403(b) plans have become more prevalent, it is | | | | may not contribute more than $16,500 for 2009 |
| becoming more important for your enrolled agent | | | | (unchanged for 2010). There is a special rule for those |
| education to include coverage of this topic. | | | | with at least 15 years of service giving them the |
| A 403(b) has similar contribution limits and features to | | | | potential to contribute up to $3,000 more. Additionally, |
| qualified plans such as the ability to borrow against a | | | | those over 50 are eligible for a catch-up contribution of |
| balance; however, a 403(b) is not necessarily a | | | | up to $5,500 for 2009 |
| qualified plan for ERISA purposes. Employees cannot | | | | If, for any year, elective deferrals are contributed to |
| set up their own 403(b) account. Only employers can | | | | multiple retirement accounts for you (whether or not |
| set up 403(b) accounts. | | | | with the same employer), consider all contributions to |
| Any eligible employee may participate. The following | | | | determine whether the total is more than the limit for |
| employees are able to participate: | | | | that year. The limit on elective deferrals applies to |
| - Employees of tax-exempt organizations established | | | | amounts contributed to: |
| under section 501(c)(3) of the Internal Revenue Code. | | | | - 401(k) plans, to the extent excluded from income, |
| - Employees of public school systems who are | | | | - Section 501(c)(18) plans, to the extent excluded from |
| involved in the day-to-day operations of a school. | | | | income, |
| - Employees of cooperative hospital service | | | | - SIMPLE plans, |
| organizations. | | | | - Simplified employee pension (SEP) plans, and |
| - Civilian faculty and staff of the Uniformed Services | | | | - All 403(b) plans. |
| University of the Health Sciences (USUHS). | | | | |
| - Employees of public school systems organized by | | | | IRS Circular 230 Disclosure - Pursuant to the |
| Indian tribal governments. | | | | requirements of the Internal Revenue Service Circular |
| - Certain ministers. | | | | 230, we inform you that, to the extent any advice |
| | | | | relating to a Federal tax issue is contained in this |
| Individual accounts in a 403(b) plan can be any of the | | | | communication, including in any attachments, it was not |
| following types: | | | | written or intended to be used, and cannot be used, for |
| - An annuity contract, which is a contract provided | | | | the purpose of (a) avoiding any tax related penalties |
| through an insurance company, | | | | that may be imposed on you or any other person |
| - A custodial account, which is an account invested in | | | | under the Internal Revenue Code, or (b) promoting, |
| mutual funds, or | | | | marketing or recommending to another person any |
| - A retirement income account set up for church | | | | transaction or matter addressed in this communication. |
| employees. Generally, retirement income accounts can | | | | |