403(b) Retirement Plans
Here are the basics of 403(b) plans, although plan rules may vary:
After the first employee is permitted to participate, the employer must extend the offer to participate to all employees of the organization. The employer may exclude certain employees from the plan:
Each employee participating in the plan determines how much money is to be automatically contributed from each paycheck. Generally, participants can invest an annual maximum of $18,500 in 2018, or $24,500 for those 50 or older.
The investments available in the plan — the most common options are mutual funds — are generally determined by the employer or the plan provisions, but participants can decide which of the options to use.
American Funds offers a wide range of investments.
As an added incentive for their employees to invest, some employers make “matching” contributions to participant accounts. Some employers match employee contributions dollar for dollar, while others contribute a percentage of what employees contribute. Employers may also make discretionary (profit-sharing) contributions into participant accounts.
Participants always own 100% of their contributions. With employer contributions, participants often become vested over time.
There are a number of options an employee can take when leaving the job:
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.