Which retirement plan is available to nonprofit organizations and public school employees and allows salary deductions?

Which retirement plan is available to nonprofit organizations and public school employees and allows salary deductions?

• A. IRA
• B. Roth IRA
• C. profit sharing plans
• D. 403B

Answer: (D)

This question is about a retirement plan that nonprofits and public schools use and that lets employees set aside part of their salary through payroll deductions. A 403(b) plan fits perfectly here. It’s an employer-sponsored, tax-advantaged plan specifically available to employees of public schools and 501(c)(3) nonprofit organizations, and it requires or at least strongly supports salary deferrals from employees via payroll deductions. The contributions grow tax-deferred until withdrawal, and many plans offer a Roth option as well for after-tax contributions, depending on the plan. An IRA or Roth IRA is an individual account you open yourself, not one tied to your employer’s payroll system, so salary deductions through your job aren’t the main feature. A profit-sharing plan is typically employer-funded and does not center on employee salary deferrals via payroll deductions in the same way, and it’s not unique to nonprofits or public schools. Therefore, the plan that matches nonprofit and public school employees with the ability to make salary-deferral contributions is the 403(b) plan.

This question is about a retirement plan that nonprofits and public schools use and that lets employees set aside part of their salary through payroll deductions. A 403(b) plan fits perfectly here. It’s an employer-sponsored, tax-advantaged plan specifically available to employees of public schools and 501(c)(3) nonprofit organizations, and it requires or at least strongly supports salary deferrals from employees via payroll deductions. The contributions grow tax-deferred until withdrawal, and many plans offer a Roth option as well for after-tax contributions, depending on the plan.

An IRA or Roth IRA is an individual account you open yourself, not one tied to your employer’s payroll system, so salary deductions through your job aren’t the main feature. A profit-sharing plan is typically employer-funded and does not center on employee salary deferrals via payroll deductions in the same way, and it’s not unique to nonprofits or public schools. Therefore, the plan that matches nonprofit and public school employees with the ability to make salary-deferral contributions is the 403(b) plan.