If you are a professional employed by a not-for-profit (NFP) 501(c)(3) organization, earning a high income and maximizing contributions to a 403(b) plan, while also owning more than 50% of a for-profit business that reports significant profits, you may be eligible to contribute to an additional retirement plan. This opportunity allows you to further optimize your retirement savings while reducing your federal and state tax liabilities.

What is a 403(b) plan?

Also known as a tax-sheltered annuity plan, a 403(b) plan is a retirement plan for employees of public schools, churches and tax-exempt 501(c)(3) organizations. Similar to a 401(k) plan, employees of these organizations can defer some of their salary into the plan’s investment accounts for retirement.

Contribution Limits and Rules

403(b) plans

For 2024, employees can contribute up to $23,000 to a 403(b) plan, with an additional $7,500 catch-up contribution for individuals aged 50 and older. In 2025, these limits increase to $23,500, with a $7,500 catch-up contribution or a special $11,250 catch-up contribution for those aged 60–63. Employer contributions to 403(b) plans vary based on organizational policies.

Simplified Employee Pension (SEP) or 401(k) plans

If you own a for-profit business, with more than 50% ownership, operating as a sole proprietorship, partnership, or corporation, you can establish a qualified retirement plan, such as a SEP IRA or 401(k), for that business. However, total contributions across your 403(b) and any additional plans cannot exceed $69,000 in 2024 or $70,000 in 2025. These limits include elective deferrals, employer contributions, and after-tax contributions.

Maximize Savings and Reduce Taxes

By leveraging both a 403(b) plan and a qualified retirement plan for your for-profit business, you can significantly increase your retirement savings and reduce your tax liabilities.