ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Also called a tax-sheltered annuity (TSA), a 403(b) is a retirement plan that can only be used by public schools and tax-exempt organizations. Teachers, ministers, and employees of cooperative hospitals and nonprofit organizations are just a few people who may be eligible to participate in a 403(b) retirement plan.

Detailed explanation-2: -The main difference between the two is that 401(a) plans are sponsored by state and local governments and some nonprofit organizations, while 403(b) plans are sponsored by certain nonprofits and public school systems. The two also differ in terms of contribution limits and employer match limits.

Detailed explanation-3: -A 403(b) plan (tax-sheltered annuity plan or TSA) is a retirement plan offered by public schools and certain charities. It’s similar to a 401(k) plan maintained by a for-profit entity. Just as with a 401(k) plan, a 403(b) plan lets employees defer some of their salary into individual accounts.

Detailed explanation-4: -A 403(b) allows employee contributions up to $22, 500 in 2023 ($30, 500 for those age 50 0r older), while IRAs only allow up to $6, 500 ($7, 500 if you’re age 50 or older). Both 403(b)s and IRAs grow tax-free, and earnings are typically only taxed at withdrawal.

Detailed explanation-5: -Qualified plans have the following features: employer’s contributions are tax-deductible as a business expense; employee contributions are made with pretax dollars, contributions are not taxed until withdrawn; and interest earned on contributions is tax-deferred until withdrawn upon retirement.