What Is an SRA Account and How Does It Work?

An SRA account, short for Supplemental Retirement Account, is a voluntary retirement savings plan that sits alongside a primary pension or retirement benefit offered by schools, universities, hospitals, churches, and other tax-exempt or governmental employers. In practice it is almost always a 403(b) plan or a 457(b) deferred compensation plan, funded through payroll deferrals from your own paycheck. For 2026, you can defer up to $24,500 of salary into one, with extra room if you are 50 or older or have long service with the same qualifying employer.¹

What an SRA Actually Is

“SRA” is not an official IRS term. It is a label employers use to describe the voluntary retirement plan they offer in addition to a pension or other core benefit. Underneath that label, the plan is a 403(b) (sometimes called a tax-sheltered annuity), a 457(b) governmental deferred compensation plan, or both running side by side.¹

A traditional pension promises a defined benefit based on a formula that the employer funds. An SRA works the opposite way. It is a defined contribution plan: you decide how much to put in, you pick investments from the plan’s menu, and the eventual balance depends on what you contributed and how those investments performed. Some employers add matching or nonelective contributions, but the engine behind an SRA is your own savings rate.

Who Can Open One

Only employees of certain organizations can participate. Eligible employers include public schools from kindergarten through higher education, churches, and organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code, such as charities, hospitals, and nonprofit research institutions. Governmental employers can offer 457(b) plans.¹ If your employer is not one of these, no SRA is available to you through work.

Within a qualifying employer, 403(b) plans must follow a universal availability rule. If the employer lets any employee defer salary into the plan, it generally has to offer that opportunity to every employee. Plans can still exclude certain groups: employees who normally work fewer than 20 hours a week, students performing certain services for the school that employs them, and nonresident aliens with no U.S. source income.²

Eligibility is tied to your current employment. Once you leave a qualifying employer, you cannot make new contributions to that SRA. The balance already in the account stays yours, and you can leave it invested or roll it over.

How You Contribute

You fund an SRA through a salary reduction agreement with your employer. That document authorizes payroll to withhold a set amount from each check and send it to the plan.³ Most plans let you choose between pre-tax deferrals, which lower taxable income now and are taxed at withdrawal, or Roth after-tax deferrals, which do not reduce current taxes but grow and distribute tax-free in retirement.

The basic 2026 elective deferral limit is $24,500. That ceiling is per person, not per plan. If you also contribute to a 401(k) at a second job, combined 403(b) and 401(k) deferrals cannot exceed $24,500. Total annual additions to your account from all sources, including employer contributions, cannot exceed $72,000 under Section 415(c).⁴

Going over the $24,500 limit across your plans is costly. The excess is taxable in the year you contributed it and taxed again when distributed. To avoid that double hit, the excess and its earnings need to be returned to you by April 15 of the following year.⁵

Catch-Up Contributions

Several provisions let older or long-tenured workers save beyond the standard limit:

Age 50 and older: an extra $8,000 per year, raising the ceiling to $32,500 for 2026.⁶
Ages 60 through 63: a SECURE 2.0 provision taking effect in 2026 lets participants in this age window contribute an extra $11,250 instead of the standard $8,000 catch-up, for a ceiling of $35,750.⁶
15-year service catch-up (403(b) only): if you have worked at least 15 years for the same qualifying 403(b) employer, your plan may allow an additional $3,000 per year, capped at $15,000 over your lifetime. It applies before the age-based catch-up, and not every plan offers it.⁷

Starting in 2026, high earners face an additional rule. If you made more than $145,000 in FICA wages the prior year, SECURE 2.0 requires any catch-up contributions to go into a Roth account rather than a pre-tax one. The amount you can save does not change, only the tax treatment.

Stacking a 403(b) and a 457(b)

If your employer offers both plan types, the deferral limits are tracked separately. You can put $24,500 into the 403(b) and another $24,500 into the 457(b) in the same year, for a combined $49,000 before any catch-up amounts.⁸ Few people can afford to max both, but knowing the limits are independent matters when you map out a savings plan.

Where the Money Gets Invested

SRAs are not brokerage accounts. A 403(b) plan typically offers two kinds of investment vehicles: annuity contracts purchased through an insurance company, and custodial accounts invested in mutual funds.¹ The fund menu varies by employer. Some plans offer a broad lineup of low-cost index funds; others are limited to a handful of annuity products with higher fees. Checking the expense ratios on your plan’s options is worth the time, because small fee differences compound into real money over a 20- or 30-year career. Governmental 457(b) plans generally offer a similar mutual fund lineup.

Getting Money Out

You can generally start taking money from a 403(b) SRA without penalty once you reach age 59½, separate from service, become totally and permanently disabled, or die (in which case the funds go to your beneficiaries). Withdrawals before a qualifying event trigger a 10% additional tax on top of regular income tax.⁹

A 457(b) plan works differently in one important way. Distributions taken after you leave your employer are not subject to the 10% early withdrawal tax, regardless of age. The penalty only applies to amounts rolled into the 457(b) from a 403(b) or other plan type.⁹ That alone makes a 457(b) more flexible if early access matters to you.

Exceptions to the 10% Penalty

Even inside a 403(b), several situations spare you the extra tax:

Leaving your employer during or after the year you turn 55, with distributions from that employer’s plan.
Total and permanent disability.
Unreimbursed medical expenses exceeding 7.5% of your adjusted gross income, up to the amount of those expenses.
Terminal illness certified by a physician.
One emergency personal expense distribution per year of up to $1,000, available since 2024.
Up to $10,000, or 50% of the account if less, for victims of domestic abuse by a spouse or partner, available since 2024.
Up to $22,000 for individuals with economic losses from a federally declared disaster.⁹

Some 403(b) plans also allow hardship distributions, but only if the plan document says so. A hardship withdrawal has to be for an immediate and heavy financial need, limited to the amount necessary.¹⁰ Hardship distributions remain subject to income tax and often the 10% early distribution tax, so they are a last resort rather than a planning tool.

Required Minimum Distributions

At some point the IRS requires you to start pulling money out whether you need it or not. Under SECURE 2.0, the starting age depends on when you were born. If you turn 73 before January 1, 2033, RMDs begin at 73. If you turn 73 after that date (born 1960 or later), the starting age is 75.¹¹

Missing an RMD triggers a 25% excise tax on the shortfall. If you fix the mistake during the correction window, the penalty drops to 10%. Steep enough that a calendar reminder or automatic distribution is worth setting up.

Borrowing From the Account

If your plan allows loans, you can borrow against your own SRA balance without triggering tax, as long as you follow the repayment rules. The maximum is the lesser of $50,000 or 50% of your vested balance. If 50% of your balance is below $10,000, the plan may let you borrow up to $10,000, though not every plan includes that provision.¹²

Repayment runs five years through substantially equal payments made at least quarterly. Loans used to buy a primary home can have a longer term. The real risk is default. If you stop making payments or leave your employer with a balance outstanding, the remaining amount is treated as a taxable distribution, with income tax plus the 10% early distribution penalty if you are under 59½.¹³

Rolling Over the Balance When You Leave

When you leave your employer or retire, you can move the balance to another eligible retirement account without owing tax. The clean method is a direct rollover: your plan administrator sends the funds straight to the receiving institution, such as an IRA or a new employer’s 403(b). No withholding, no tax consequences.¹⁴

The alternative is an indirect rollover, where the plan pays the money to you and you have 60 days to redeposit it into a new account. Miss the deadline and the full amount becomes taxable income, plus any early distribution penalty. The plan also has to withhold 20% for federal taxes on indirect rollovers, meaning you would need to add that 20% from other funds to roll over the whole balance and then recover the withheld amount at tax time.¹⁴ Direct rollovers avoid all of that.

1
Internal Revenue Service. IRC 403(b) Tax-Sheltered Annuity Plans
2
Internal Revenue Service. 403(b) Plan Fix-It Guide – You Didn’t Give All Employees of the Organization the Opportunity to Make a Salary Deferral
3
Internal Revenue Service. Retirement Plans FAQs Regarding 403(b) Tax-Sheltered Annuity Plans – Section: Contributions
4
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living
5
Internal Revenue Service. Consequences to a Participant Who Makes Excess Annual Salary Deferrals
6
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
7
Internal Revenue Service. Retirement Topics – 403(b) Contribution Limits
8
Internal Revenue Service. How Much Salary Can You Defer if You’re Eligible for More Than One Retirement Plan
9
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
10
Internal Revenue Service. Do’s and Don’ts of Hardship Distributions
11
Congress.gov. Required Minimum Distribution (RMD) Rules for Original Account Owners
12
Internal Revenue Service. Retirement Topics – Plan Loans
13
Internal Revenue Service. Retirement Plans FAQs Regarding Loans
14
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions