What Is The Distinction Between 403B And 457B Plans?

What sets apart the 457(b) and 403(b) retirement plans? These plans cater to distinct groups of individuals. The 457(b) plan is designed primarily for state and local government employees, while there’s also a 457(f) variation specifically tailored for high-ranking executives within nonprofit organizations. On the other hand, the 403(b) plan is commonly available to employees in both private nonprofit organizations and government positions, such as public school educators. This differentiation in eligibility and target audience is crucial for understanding the nuances of these retirement savings options.

What are the key distinctions between 403(b) and 401(k) retirement plans in terms of investment options? 403(b) plans primarily provide access to mutual funds and annuities as investment choices. In contrast, 401(k) plans expand the investment horizon by offering not only mutual funds and annuities but also stocks and bonds. This broader array of options stems from the fact that 401(k) plans are generally costlier for companies to administer. Consequently, these plans typically provide a more extensive selection of investment opportunities, which can sometimes result in higher quality investment options for participants.

The distinction between 401(a) and 403(b) retirement plans primarily revolves around eligibility requirements and plan structures. In the case of 401(a) plans, employers have the option to mandate enrollment for eligible employees and establish contribution guidelines. Importantly, employers are obligated to make contributions to these plans. Conversely, 403(b) plans differ in that they grant employees the choice to voluntarily enroll. This key feature distinguishes the two plan types. Additionally, it’s important to note that this information is current as of March 11, 2023.