Who Can Use a 403(b) Retirement Plan?
Eligibility for a 403(b) plan is determined by two key factors: the type of organization you work for and your specific employment status within it.
A 403(b) plan is a retirement savings plan that allows employees to contribute a portion of their salary to individual accounts, with the benefit of tax-deferred growth. These plans are similar in function to the more widely known 401(k) plans but are specifically available to employees of certain public and non-profit organizations. Contributions made from an employee’s salary are generally not subject to federal or state income tax until the funds are withdrawn. Some plans also permit designated Roth contributions, where money is taxed before it is contributed but can be withdrawn tax-free in retirement.
Qualifying Employer Organizations
The ability to offer a 403(b) plan is restricted to specific types of employers. An individual’s access to this retirement plan depends on whether their employer falls into one of the designated categories.
The most common sponsors of 403(b) plans are public educational institutions. This category, established under Internal Revenue Code Section 170, includes public elementary and secondary schools, as well as state-funded colleges and universities. Any employee of a public school system involved in its daily operations, from teachers and administrators to support staff, works for a qualifying organization.
Another category of eligible employers consists of tax-exempt organizations under IRC Section 501(c)(3). These are organizations operated for religious, charitable, scientific, or educational purposes. These include non-profit hospitals, private schools and universities, public charities, and private foundations. An organization must have formal recognition of its 501(c)(3) status from the IRS to qualify.
A third group of qualifying employers is composed of churches and certain church-related organizations. This includes not only individual churches but also conventions or associations of churches and their affiliated entities. Some organizations, such as a church-run school or hospital, might also be a 501(c)(3) organization.
Employee Participation Rules
Once it is established that an employer is eligible to offer a 403(b) plan, the focus shifts to which employees are allowed to participate. The governing principle is the “universal availability rule,” a provision detailed in IRC Section 403. This rule mandates that if an employer permits one employee to make elective deferrals, it must extend that opportunity to all of its employees.
Despite the broad reach of the universal availability rule, the law permits employers to exclude certain classes of employees from participation. One common exclusion is for employees who are expected to work fewer than 1,000 hours in a year. However, a rule effective in 2025 requires plans to cover long-term, part-time employees who complete at least 500 hours of service in two consecutive years. This rule for part-time workers overrides the 1,000-hour exclusion but does not affect other allowable exclusions.
An employer may also exclude:
- Students who perform services for the school, college, or university where they are enrolled and regularly attending classes.
- Employees who are expected to contribute $200 or less annually.
- Non-resident aliens who receive no income from U.S. sources.
- Employees who are already eligible to participate in another of the employer’s retirement plans, such as a 401(k) or a 457(b) plan.
The plan document, a formal written program required for all 403(b) plans except for certain church plans, must clearly define which employees are eligible and which are excluded. Any exclusions must be applied uniformly to all employees within a permitted category. For example, a plan choosing to exclude students must exclude all of them.
Unique Eligibility Scenarios
Ministers have a unique status under tax law that directly impacts their 403(b) eligibility. A duly ordained, commissioned, or licensed minister performing ministerial services can participate in a 403(b) plan. This is true even if the minister is considered self-employed for Social Security purposes. For the purposes of a 403(b) plan, a self-employed minister is treated as an employee of a qualifying tax-exempt organization, making them eligible to contribute.
Participation is limited to employees of a qualifying organization. Independent contractors, who receive a Form 1099-NEC for their services, are not eligible to participate in the 403(b) plan of the organization for which they perform work. This holds true even if the work is performed for a public school or a non-profit. The determination of employee status is based on common-law rules that assess the degree of control an organization has over how a worker performs their duties.