Employees make contributions through their volunteer deposits. It should be noted that only employers are allowed to set up 403b plans based on the conditions set by the employees themselves. 

Employers will set aside certain amounts from their employee’s work paychecks that will be deposited to their 403b accounts. 

This will be initiated after the employees sign up a salary withdrawal agreement. Lower taxable salary will then be reflected on the pay stubs given to employees.

Employers on their part can look upon deferrals to purchase pre-approved investments. They usually invest their money in investment funds and companies, an even in annuity products sold by various insurance companies. 

While their employees have the option whether to contribute to their 403b account or not, or choose not to invest into their own deferrals, employers are also not mandated to go ahead with the deposits.

The maximum amount of contributions that is allowed in a 403b plan is determined by the Internal Revenue Service. 

According to updated IRS guidelines, the maximum amount of contributions that can be made to a 403b plan must be less than employee’s yearly income, or make that $49,000 including any employer deposits and employee deferrals. 

The $49,000 figure does include however, volunteer deposits that must go beyond the standardized $16,500 limit. Catch-up deposit schemes intended for individuals 50 years old and above are excluded.

Understanding all the guidelines and rules that govern 403b plans and the 403b contribution limits is important so you can find your way through the technicalities involved. 

This way you can achieve the most out of the 403b plan.

If you are considering Retirement Planning, call for a free consultation today.