---
title: The 403(b) - Like a 401(k), Almost
description: What's the difference between a 401(k) plan and a 403(b) plan? Compare the similarities & differences of two popular retirement plan types.
---

[Uniglobal Blog | ERISA, Compliance, and Administration ](https://blog.uniglobal.com)

# [The 403(b) - Like a 401(k), Almost](https://blog.uniglobal.com/uniglobal/difference-between-403b-and-401k)

 Written by [Uniglobal](https://blog.uniglobal.com/author/uniglobal) | Jul 8, 2020 12:45:24 PM

### 401(k) and 403(b) Plan Comparison

In the private sector, most employees have access to an employer-sponsored 401(k) plan. In the public non-profit space, including government, hospitals, public schools, and charities, a 403(b) could be the tax-deferred vehicle of choice in lieu of a 401(k).

**What the Internal Revenue Code Says about 403(b) Plans**  
IRC (Internal Revenue Code) Section 403(b) lays out the rules that govern 403(b) Plans. Despite their similarities to a 401(k) Plan, a 403(b) Plan is specific only to select employers.

Eligible employers are a:

- public school, college, or university,
- church; or
- charitable entity tax-exempt under Section 501(c)(3) of the Internal Revenue Code

**403(b) and Non-Profits**  
In this article, we are going to focus on that last employer entity, the 501(c)(3). Under IRC 501(c)(3) sponsors are permitted to establish a 403(b) plan. However, being a 501(c)(3) does not preclude establishment of a 401(k) plan, so these special groups have an option not afforded to those of us in the for-profit space.

In the grand scheme of things, a 403(b) is almost identical to a 401(k), including [limits](https://blog.uniglobal.com/blog/uniglobal/cola-increases-for-dollar-limitations-on-benefits-and-contributions); the chart below compares a 401(k) with a 403(b), and is merely a guide. Determining which is right for your organization is a much longer conversation which we are happy to have with you.

### 401(k) vs 403(b) Plan 

| Feature | 401(k) | 403(b) |
| --- | --- | --- |
| Are written Plan Documents required? | Yes | Yes |
| Can employees contribute pre-tax? | Yes | Yes |
| Are Roth contributions possible? | Yes | Yes |
| Can the Plan Sponsor offer a Match? | Yes | Yes |
| Are participant Loans allowed? | Yes | Yes |
| Does the Plan have ADP/ACP testing? | ADP & ACP – Yes | ADP – No; ACP (for the Match) – Yes |
| Does the Plan have to file Form 5500? | Yes | Yes |
| Can the Plan use a Vesting Schedule? | Yes | Yes |
| Opportunity for robust investment providers? | Yes | More so today, but not as many as a 401(k)* |

*Uniglobal works with dozens of record-keepers, these are the companies that offer the platform for the retirement plan – they are the face of the retirement plan to plan participants. You can see some of the providers we partner with on our [home page](https://www.uniglobal.com). Although we do not advise on investments, we can tell you a thing or two about the record-keepers, mainly that, there are more options with a 401(k) than a 403(b) but the gap is closing quickly.

### 403(b) Plan Limits and Contributions

Under IRC §402(g)(1), a participant in a 403(b) plan may contribute $19,500 pre-tax, or, 

if Roth deferrals are permitted, $19,500 in Roth – or some combination of the two. If offered, a sponsor of a 403(b) plan may offer a Match on those deferrals or a plan-wide Non-Elective contribution. An extremely generous plan sponsor may have a 403(b) that does both. As we see in the example below.

### 403(b) Example:

Mary defers **$19,500** from her salary before taxes.

The charity she works for contributes a **Match**, on her behalf, **100% of her deferrals up to**

** 6%** of her gross annual salary into the 403(b) plan. Mary has compensation of $85,000. Her Match could be as high as **$5,100** for the 2020 plan and calendar year.

Her employer also has a **fixed non-elective** formula in the plan which is a guaranteed contribution every year of a flat **$10,000**.

All combined, Mary could have **$34,600** in contributions for 2020, but, if she does not contribute from her salary at all, she only would receive the non-elective (AKA "profit sharing") of $10,000.

If the plan allows for Roth contributions to be contributed and matched on, all or part of the $19,500 could be designated Roth contributions.

While a 403(b) offers participants a way to control their future and save now for tomorrow in comparison to a 401(k) it’s almost identical.

### A Note on Fees

You might be thinking that a 403(b) Plan has lower expenses because it is not subject to as much as a 401(k), this is not necessarily true in every case. Many factors affect pricing. It is prudent to review all services, expenses, offerings, and support afforded, before a sound decision can be made on which retirement plan is best for you and your employees – a 401(k) or a 403(b).

The 403(b) Plan. Much like it’s cousin the 401(k) but truly unique in it’s own regard. [CNN Money](http://money.cnn.com/retirement/guide/401k_403bplans.moneymag/index2.htm?iid=EL) offers their view on the comparison between a 403(b) and a 401(k).

[View full post](https://blog.uniglobal.com/uniglobal/difference-between-403b-and-401k)

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