(How) Are 403(b) Plans Different from 401(k)s?
The primary difference between 403(b) plans and 401(k) plans is the type of employer offering the plan, but a couple of new surveys from the Plan Sponsor Council of America (PSCA) highlight some interesting design differences as well. Believe it or not, 403(b) plans have been around longer—since 1958. 401(k)s didn’t arrive until 1978 and really were not effective until 1981 (see Talking Points: An ‘Unintended’ Consequence ). Like its 401(k) cousin, it was initially created under part of the Internal Revenue Code (Section 403(b)!)., and—like the 401(k)—it was designed to allow employees of certain tax-exempt organizations, such as public schools, hospitals, and religious institutions, to contribute to retirement savings on a tax-deferred basis. Over time, many of the things that differentiated the two (notably contribution limits) have been eliminated or at least narrowed. That said, their different histories and distinct employee populations mean that nota...