403(B) Salary Reduction Agreement: Fill & Download for Free

A 403(b) follows pretty much the same rules as its 401(k) counterpart, but is for employees of non-profit institutions.There are annual contribution limits.You may have both traditional and ROTH options.Contributions to a traditional 403(b) are tax deductible. They are probably being made as withdrawals from your paycheck and will appear on your W-2 at the end of the year and feed into your taxes annually.NOTE: Your employer may and probably does reduce your federally-reported income by your contributions on your W-2, so you may not have noticed that you effectively include them. (You may notice that your federally-taxable income is different than your income for social security or Medicare - 403(b) contributions are one of the reasons.) (Your contributions may also be called out on your W-2 in box 12, Code E — Elective deferrals under a Section 403(b) salary reduction agreement.)Withdrawals from a traditional 403(b) are taxed at the federal level. (Taxation varies at the state level - both going in and coming out.) There are age and work-related rules about this. You should get your tax information annually on a 1099-R form. You will report this on your taxes.

Step 1 — Get a job at a company that offers a 401(k) plan.Step 2 — Satisfy the plan’s eligibility requirements, whatever they might be (length of service, or whatever)Step 3 — Enroll in plan, according to specific procedures and requirements specified by plan, e.g., sign salary reduction agreement, make investment elections, designate beneficiaries for account, etc. (All of this has to be found out from the company’s HR department, or whoever handles the day-to-day administration of the plan. It will all also be provided to you in writing.)Step 4, 5, 6, etc. — To be determined according to terms of plan, employer’s procedures, etc. Will vary from case to case.There is no storing of money, there is no spending of money (at least in connection with enrolling in a 401(k) plan). You direct a portion of your salary to be contributed to the plan, and the employer may or may not make additional contributions on your behalf. Those contributions accumulate on a tax-deferred basis, until distributed to you. The plan will determine when distributions will be available to you — most commonly upon your termination of employment, but there could be other distribution triggers in a given plan.The plan would have details literally too numerous to mention here, but, most importantly, will not necessarily be as described in some of the other responses. They are describing the most generic terms of a plan — perhaps their own 401(k) plan, as opposed to 401(k) plans in general — and there is no reason to believe that any particular employer’s plan will contain those same provisions. (see Step 1, above).If your employer does not offer a 401(k) plan, then you’ll have to find something else to do with your money. (Note: If you work for a public school, a tax exempt employer, or a state or local government, there are other types of plans that your employer might offer instead that are very similar to 401(k) plans . Those are 403(b) plans — sometimes also referred to as “tax sheltered annuities” — or 457(b) plans. You might look into those, if that is your situation.)Finally, one thing to keep in mind . . . a 401(k) account is not just a big IRA, just like a minivan is not just a big bicycle even though they both get you from point A to point B.

I don't see why they would be not safe.A tax-sheltered annuity (TSA), also referred to as a tax-deferred annuity (TDA) plan or a 403(b) retirement plan, is a retirement savings plan for employees of certain public education organizations, non-profit organizations, cooperative hospital service organizations and self-employed ministers.How it works (Example):Organizations offer tax-sheltered annuity plans to eligible employees for long-term investmentgrowth, akin to a 401(k) plan. Payments to these plans typically follow one of three forms:The employer makes payments to the plan through a salary-reduction agreement.The employee personally makes payments to the plan.The employee makes payments to the plan and the employer matches these payments.In 2010 the basic salary deferral limit was $16,250.Why it Matters:TSA plans consist of benefits that set them apart from a 401(k):Age 50 + Catch-Up: Participants who are 50 years old and older are eligible to make additional annual contributions to the TSA plan starting from the year they turn 50. If a participant is already contributing the maximum amount to his/her plan, then he/she may also be able to contribute more with Catch-Up Contribution. In 2004, the Age 50+ catch-up contribution limit was $3,000. That amount increases to $4,000 in 2005 and $5,000 in 2006.Lifetime Catch-Up: This provision is available to employees with least 15 years of service, and allows participants to contribute up to $3,000 in addition to the normal contribution limit if they have previously contributed less than $5,000 a year to the plan on average. The lifetime limit for the catch-up provision is $15,000.Taxes and Distributions: Taxes on tax-sheltered annuity plan contributions and earnings are not levied until the plan owner withdraws money from the plan. This money is taxed as regular income. Typically, withdrawals are not made until the plan owner is at least 59 ½ years old. If the plan owner makes a withdrawal before their retirement age, then he/she will have a 10% penalty payable to the IRS (unless special circumstances apply).Investment Options: Unlike in 401(k) plans, TSA plan participants are not permitted to invest in individual stocks. Investment options specific to TSA plans include annuity and variable annuitycontracts with insurance companies, custodial accounts consisting of mutual funds, as well as retirement income accounts for churches.