A 403(b) TSA plan is a type of retirement savings plan available to certain employees of public schools, tax-exempt organizations, and ministers. These plans allow participants to contribute a portion of their salary to a tax-deferred retirement account, reducing their taxable income for the year. The plan is named after the relevant section of the Internal Revenue Code.
Benefits of a 403(b) TSA Plan
- Tax-Deferred Growth: Contributions to a 403(b) TSA plan grow tax-deferred, meaning you won’t pay taxes on investment earnings until you withdraw the funds in retirement.
- Reduced Taxable Income: Contributions to a 403(b) TSA plan are made before taxes, reducing your taxable income for the year.
- Higher Contribution Limits: 403(b) TSA plans have higher contribution limits than traditional IRAs, allowing you to save more for retirement.
- Portability: 403(b) TSA plans are generally portable, meaning you can take the plan with you if you change jobs or retire.
- Loans and Withdrawals: Many 403(b) TSA plans offer loan provisions and withdrawal options, providing access to your funds in case of an emergency.
Eligibility Requirements
To be eligible for a 403(b) TSA plan, you must be an employee of:
- Public Schools: Public schools, including state colleges and universities.
- Tax-Exempt Organizations: 501(c)(3) organizations, such as hospitals, museums, and charities.
- Ministers: Ministers and other clergy members.
Investment Options
403(b) TSA plans typically offer a range of investment options, including:
- Annuity Contracts: Fixed and variable annuity contracts offered by insurance companies.
- Mutual Funds: A variety of mutual funds, including equity, fixed income, and balanced funds.
- Exchange-Traded Funds (ETFs): some plans offer a selection of ETFs or a brokerage window with ETF access, but mutual funds and annuities are the more common options.
2026 Contribution Limits
For 2026, the elective deferral limit, the most an employee can contribute out of salary to a 403(b), is $24,500. Participants age 50 or older can add a catch-up contribution of $8,000. Under SECURE 2.0, employees who turn 60, 61, 62, or 63 in 2026 can make a higher “super” catch-up of $11,250 instead of $8,000. Total annual additions from all sources (your contributions plus employer contributions) are limited to $72,000 or 100% of your includible compensation, whichever is less. These figures are adjusted for inflation each year, so check the IRS limits for the current year before you contribute.
The 15-Year Rule: the 403(b)’s Secret Weapon
This catch-up is unique to the 403(b) and does not exist for 401(k) plans. Employees with at least 15 years of service at the same eligible employer (a public school system, hospital, health agency, or church) can contribute an extra $3,000 per year on top of the regular and age-50 catch-up limits, up to a lifetime maximum of $15,000. If you qualify for both the 15-year and the age-50 catch-up, the IRS applies contributions above the regular limit to the 15-year rule first. A career teacher or hospital worker who has been under-contributing for years is exactly the person this rule was written for.
403(b) vs. 401(k): the Real Differences
The two plans look alike because the contribution limits and catch-up rules are the same, but the differences matter. A 401(k) is offered by for-profit private companies; a 403(b) by public schools, 501(c)(3) nonprofits, and ministers. Investment options in 403(b)s are historically narrower: annuity contracts and mutual funds, with ETFs rare outside brokerage windows. ERISA coverage can differ, particularly for church plans. And 403(b)s operate under a “universal availability” rule: if any employee can make elective deferrals, essentially every employee must be allowed to, which is a more generous standard than the coverage tests applied to 401(k)s.
Getting Started with a 403(b) TSA Plan
If you’re eligible for a 403(b) TSA plan, here’s how to get started:
- Check with Your Employer: Confirm that your employer offers a 403(b) TSA plan and review the plan details.
- Choose Your Investments: Select from the available investment options, considering your risk tolerance and retirement goals.
- Set Up Contributions: Arrange for payroll deductions to fund your 403(b) TSA plan.
A 403(b) Tax-Sheltered Annuity plan is a powerful tool for retirement savings, offering tax-deferred growth, reduced taxable income, and higher contribution limits. By understanding the benefits, eligibility requirements, and investment options, you can unlock the full potential of these plans and secure a brighter financial future.
Winchell House 
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