Judging from the above comments, the components of a 403(b) must depend upon the individual school district.
(Shooting from 20 or 30 year old memories here.)
- The 403 B preceded the 401 K by a number of
years.
- The IRS 403 B provision was originally intended to allow certain public employees (including teachers) to shelter from taxes a portion of their pay in
annuities. In my early
years the plan was often referred to by colleagues as a
TSA (
Tax-Sheltered Annuity) as that was the original scope of these plans.
- At some point early on it was expanded to allow these employees to invest in mutual funds. (Employees had pushed for this.) Haven’t time to check, but either by adjucation or legislation that change occurred in the early 70s.
- OJ is correct (as pertains to where I worked and perhaps more generally). The school district or other employer had control of which fiduciary (and fee based advisor) could handle their workplace account. At first only one fund company was allowed where I worked; and there was a 4+% front load on everything. A few
years later the employees organization pushed the employer to include no-load T. Rowe Price as a second option. With Price there were no restrictions as to which funds we might purchase.
- There was a convenient IRS loophole that lasted until at least the late 90s. It wasn’t widely known. It allowed employees to do 403 B transfers from the plan’s designated fiduciary to any other fund company of choosing
while still working / contributing. The transfers could be partial. There was some basic paperwork, but no harder than moving an IRA from one custodian to another would be today.
- The above loophole was plugged (either by the regulatory authorities or legislation) sometime after 1998.
