Hurricane Katrina relief provisions. New rules provide for tax-favored withdrawals, repayments and loans from certain retirement plans (including 403(b) annuity contracts for taxpayers who suffered economic losses as a result of Hurricane Katrina, Rita, or Wilma. See Publication 4492 for details.

Limit on elective deferrals. For 2005, the limit on elective deferrals has been increased from $13,000 to $14,000. Additionally, if you have at least 15 years of service with a public school system, hospital, home health service agency, health and welfare service agency, church, or convention or association of churches (or associated organizations), the limit on elective deferrals to your 403(b) account is increased by the least of:

See chapter 4.

Limit on annual additions. For 2005, the limit on annual additions has been increased from $41,000 to $42,000. Additionally, if you are a foreign missionary, and your adjusted gross income is $17,000 or less, contributions to your 403(b) account will not be treated as exceeding the limit on annual additions if the contributions are not in excess of $3,000. See chapter 3.

Catch-up contributions for persons age 50 or over. If you will be age 50 or over by the end of 2005, you may be permitted to make additional catch-up contributions of up to $4,000 to your 403(b) plan. See chapter 6.

Limit on elective deferrals. For 2006, the limit on elective deferrals has been increased from $14,000 to $15,000. See chapter 4.

Limit on annual additions. For 2006, the limit on annual additions has been increased from $42,000 to $44,000. See chapter 3.

Catch-up contributions for persons age 50 or over. If you will be age 50 or over by the end of 2006, you may be permitted to make additional catch-up contributions of up to $5,000 to your 403(b) plan for 2006. See chapter 6.

Roth contribution program. For tax years beginning after December 31, 2005, your 403(b) plan may allow you to contribute to a Roth contribution program. Under this program, you can designate all or a portion of your elective deferrals as Roth contributions. Elective deferrals designated as Roth contributions must be maintained in a separate Roth account. Contributions to a designated Roth account are not excluded from your gross income, however, qualified distributions from a Roth account are excluded from your gross income. Elective deferrals. The maximum amount of contributions allowed under a Roth contribution program is your limit on elective deferrals, less elective deferrals not designated as Roth contributions. See chapter 4. Rollovers. A distribution from your designated Roth account can only be rolled over to another designated Roth account of yours or a Roth (IRA) of yours. Qualified distributions. A qualified distribution is a distribution that is made after the nonexclusion period and:

A qualified distribution does not include a distribution of excess elective deferrals. Excess elective deferrals in a designated Roth account are treated in the same manner as excess deferrals in a non-Roth account. See chapter 8. The nonexclusion period is the 5 tax-year period beginning with the earlier of:

Proposed Income Tax Regulations pertaining to tax-sheltered annuities within the meaning of section 403(b) of the Internal Revenue Code were issued on November 16, 2004. Generally, when finalized, these regulations will be effective for taxable years beginning after December 31, 2006. The Proposed Regulations, REG-155608-02, 2004-49 I.R.B. 924 are available at www.irs.gov.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

This publication can help you better understand the tax rules that apply to your 403(b) (tax-sheltered annuity) plan.

In this publication you will find information to help you:

This publication does not provide specific information on the following topics.