IRS Pub 571 – In the world of retirement savings, 403(b) plans stand out as a powerful tool for employees of public schools, certain tax-exempt organizations, and ministers. Often referred to as tax-sheltered annuity (TSA) plans, these retirement vehicles offer tax advantages that can help build a secure financial future. IRS Publication 571, officially titled “Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt Organizations,” serves as the go-to resource for understanding the rules, limits, and benefits of these plans. Revised in January 2026, this publication incorporates the latest updates to ensure compliance and maximize savings.
Whether you’re a teacher, nonprofit worker, or eligible minister just starting out or nearing retirement, this SEO-optimized guide breaks down the essentials of IRS Pub 571. We’ll cover eligibility, contribution limits for 2026, distributions, and more—drawing from trusted IRS sources to provide accurate, up-to-date information. For the full details, you can download the official PDF directly from the IRS website: https://www.irs.gov/pub/irs-pdf/p571.pdf.
What Is a 403(b) Plan?
A 403(b) plan is a retirement savings plan designed specifically for employees of public educational institutions, certain 501(c)(3) tax-exempt organizations, and qualified ministers. It’s similar to a 401(k) but tailored to the nonprofit and public sectors. According to IRS Pub 571, your 403(b) account can take the form of:
- An annuity contract through an insurance company.
- A custodial account invested in mutual funds or group trusts.
- A retirement income account for church employees, which may include annuities, mutual funds, or other investments.
These plans allow you to set aside money for retirement on a tax-advantaged basis, helping your savings grow over time. The key appeal? Contributions and earnings are generally tax-deferred until withdrawal, making it an efficient way to prepare for post-work life.
Who Is Eligible to Participate in a 403(b) Plan?
Eligibility is straightforward but specific. IRS Publication 571 outlines that you can participate if you’re:
- An employee of a 501(c)(3) tax-exempt organization.
- A public school employee involved in daily operations (e.g., teachers, administrators).
- An employee of a cooperative hospital service organization.
- Civilian faculty or staff at the Uniformed Services University of the Health Sciences.
- An employee of a public school system organized by Indian tribal governments.
- A certain minister, including those employed by 501(c)(3) organizations, self-employed ministers treated as working for tax-exempt entities, or chaplains performing ministerial duties.
Employers must offer “universal availability,” meaning if the plan allows elective deferrals for any employee, it must be open to all eligible employees. Note that only employers can establish these accounts—self-employed ministers can’t set up their own but can contribute to retirement income accounts.
Key Benefits of Contributing to a 403(b) Plan
Why choose a 403(b) over other retirement options? IRS Pub 571 highlights several advantages:
- Tax Deferral on Contributions and Earnings: Traditional contributions reduce your taxable income now, and growth is tax-free until distribution (typically in retirement). Roth contributions are made after-tax, but qualified withdrawals are tax-free.
- Potential for Employer Matching: Many plans include nonelective contributions from your employer, boosting your savings.
- Saver’s Credit Eligibility: Low- to moderate-income participants may qualify for the Retirement Savings Contributions Credit (see below).
- Portability and Flexibility: Rollovers to IRAs or other eligible plans are often allowed, providing options as your career evolves.
However, contributions are generally subject to Social Security and Medicare taxes. Overall, these plans can significantly enhance retirement security for eligible workers.
How Contributions Work in a 403(b) Plan?
Contributions to your 403(b) can come from various sources, as detailed in Pub 571:
- Elective Deferrals: Salary reductions (pre-tax or Roth) where you choose to defer part of your pay.
- Nonelective Contributions: Employer-funded, such as matching or discretionary amounts (can be designated as Roth).
- After-Tax Contributions: Made with already-taxed income (not Roth and not deductible).
- Combinations: A mix of the above for optimal savings.
Self-employed ministers can contribute directly. You don’t report elective deferrals on your tax return—they appear on Form W-2 (Box 12, Code E for traditional; BB for Roth).
2026 Contribution Limits for 403(b) Plans
Staying within limits is crucial to avoid penalties. IRS Publication 571 specifies the Maximum Amount Contributable (MAC) as the lesser of the limit on annual additions or elective deferrals. For 2026:
| Limit Type | Amount |
|---|---|
| Elective Deferrals | $24,500 |
| Annual Additions | Lesser of $72,000 or 100% of includible compensation |
| 15-Year Rule Increase (if eligible) | Up to $3,000 (lifetime cap $15,000) |
The annual additions limit applies to all contributions combined. Includible compensation includes taxable wages, elective deferrals, and certain benefits from your most recent full year of service.
For ministers and church employees, special rules apply, including an alternative $10,000 annual limit (lifetime max $40,000).
Catch-Up Contributions in 2026
If you’re approaching retirement, catch-up options can supercharge your savings. Per Pub 571:
- Age 50+ Catch-Up: Add up to $8,000 if you turn 50 by year-end and the plan permits.
- Ages 60-63 Enhanced Catch-Up: Up to $11,250 (greater of $10,000 or 150% of the standard catch-up).
- 15-Year Rule: For those with 15+ years at a qualifying organization, an additional $3,000 (subject to lifetime limits).
Catch-ups are allocated first to the 15-year rule, then age-based. Total elective deferrals could reach $32,500 for age 50+ or higher for ages 60-63.
Handling Excess Contributions
Exceeding limits? IRS Pub 571 warns of penalties. Excess annual additions are taxable and may incur a 6% excise tax; excess deferrals must be distributed by April 15 of the following year to avoid double taxation. Use the worksheets in Chapter 9 of the publication to calculate and correct.
Distributions, Rollovers, and Tax Rules
Distributions from 403(b) plans are generally taxable as ordinary income. Pub 571 notes permissible distributions after age 59½, severance from employment, disability, death, hardship, or specific emergencies (e.g., domestic abuse, disasters). Minimum required distributions start at age 73, with a 25% excise tax for non-compliance.
Rollovers can be tax-free to IRAs, other 403(b)s, or Roth IRAs (taxable conversion). Direct rollovers avoid 20% withholding. For more on distributions, refer to IRS Pub 575.
Retirement Savings Contributions Credit (Saver’s Credit)
A bonus for eligible savers: The Saver’s Credit offers up to 50% of contributions (max $2,000 credit for individuals). For 2026, AGI limits are:
- Married Filing Jointly: Up to $80,500
- Head of Household: Up to $60,375
- Single/Other: Up to $40,250
Claim it on Form 8880.
Recent Updates and Reminders from IRS Pub 571
The 2026 revision includes SECURE 2.0 Act features like Pension-Linked Emergency Savings Accounts (PLESAs), safe harbor deferral-only plans, military spouse credits, and matching on student loans. De minimis incentives, emergency distributions, and terminally ill exceptions also apply. Stay informed via IRS.gov/Pub571 for future developments.
Final Thoughts on Maximizing Your 403(b) Plan
IRS Publication 571 is an indispensable resource for navigating 403(b) plans, ensuring you make the most of tax-sheltered savings. With 2026 limits increasing, now’s the time to review your contributions and plan ahead. Download the full PDF here: https://www.irs.gov/pub/irs-pdf/p571.pdf. Consult a tax professional for personalized advice, as rules can vary by situation. Start saving today for a brighter tomorrow!