Beginning in 2006, non-profit business, universities, and hospitals can offer a new retirement plan that allows for after-tax contributions but tax-free withdrawals. The new Roth 403b Retirement Plan allows the non-profit sector to experience the same long-term retirement benefits of their corporate counterparts. While participants can't invest in individual stocks, Roth 403b retirement plan participants have the option of annuity and variable annuity contracts or custodial accounts that work with mutual funds.

Much like a Roth IRA, Roth 403b retirement plans allow employees in the non-profit world to invest funds from their take home pay towards their retirement. Even though this doesn't reduce their taxable income, the 403b retirement plan allows participants to take out all of their contributions and potential gains completely tax-free upon retirement.

There are several advantages to the Roth 403b retirement plans. Participants can contribute far more than the limit for personal IRA accounts ($4,000 in 2006; $5,000 if someone is over 50 years old). Roth 403b retirement plan contributors can invest up to $15,000 per year with a catch-up provision of an additional $5,000 if they are over 50 years of age. Also, Roth 403b participants can still maintain an existing Roth IRA or start up a new one.

For non-profit businesses that want to match employee contributions, the tax rules for Roth 403b retirement plans differ slightly. Employer contributions are still made with pretax dollars. They are kept in a separate account and taxed upon withdrawal. This allows non-profit businesses to take their allotted tax deductions. However, participants will be responsible for taxes on matched contribution.