Permitted Investments for 403(b) Plans

Investment options are generally more limited for 403(b) plans than they are for other qualified retirement plans. 

Amounts contributed into 403(b) accounts may only be invested in annuity contracts or custodial accounts that hold mutual funds. 

Further, 403(b) plan assets invested in annuity contracts may be invested in fixed or variable annuities.

With a fixed annuity, participants are guaranteed a specified rate of return on their contributions. With a variable annuity, participants can direct their plan contributions to different investment options, usually mutual funds, to be held in their annuity account. 

For fixed and variable annuities, the amount of money participants receive in retirement will vary depending on various factors, which can include:

• how much participants contribute;
• the type of investment options offered by the plan and the options selected by participants;
• the rate of return on the investments; and 
• plan fees and expenses.

Source: GAO Report to the Chairman, Committee on Education and Labor, House of Representatives, “DEFINED CONTRIBUTION PLANS 403(b) Investment Options, Fees, and Other Characteristics Varied”