4 Questions Plan Sponsors Should Ask to Understand the Similarities and Differences Between 401(k) and 403(b) Plans
1. Which employers can offer a 403(b) plan?
- Public education organizations such as public elementary and high schools, state colleges and universities, and boards of education.
- 501(c)(3) nonprofit organizations such as private schools, research facilities, private hospitals, charities, social welfare agencies, healthcare organizations, and religious institutions.
- Grandfathered Indian tribal governments.
- Certain religious ministers of a church or related religious organizations.
2. Which employers can offer a 401(k) plan?
Almost any type of company may offer a 401(k) plan. Most private, for-profit companies are eligible. Many tax-exempt, non-profit organizations have a choice between sponsoring a 401(k), a 403(b), or both.3. How are 401(k) and 403(b) plans similar?
- Have the same 402(g) elective deferral contribution limits. For 2016, elective deferrals cannot exceed $18,000.
- Allow the additional catch-up contribution for employees over age 50. For 2016, the maximum catch-up contribution is $6,000.
- Allow Roth contributions.
- Allow both elective deferrals and employer contributions.
- Require plan sponsor oversight.
Click to learn more about the final 403(b) regulations or visit https://www.irs.gov/publications/p571/ch04.html.