403(b)/Tax Sheltered Annunities A 403(b) plan is a retirement plan for certain employees of tax-exempt organizations: schools, government organizations and churches. Again, 403(b) plans provide an attractive benefit that appeals to high quality employees.A 403(b) plan is funded primarily with employee contributions. Contributions are tax deferred and ma-y be excluded from an individual's gross income until withdrawn. Employees make contributions through payroll deductions which reduce their reportable earned income. For 2018 employees may contribute 100% of compensation or $18,500 whichever is less in regular contributions. The IRS refers to these as elective deferrals. Employers may also contribute to the plan on a fixed or discretionary basis. An additional $6,000 Catch-Up Contribution is allowed for workers age 50 and older.Corporate Financial Services helps organizations to design, implement and administer these types of plans. Distributions from employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.