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I currently am working at a non-profit organization, and I am trying to figure out what the difference is between the 403(b) and 401(a).

I am trying to decide whether I should have a percentage of my salary taken off to go to one of these accounts, or if I should just invest it into a Roth IRA until they are able to match my contribution, which won't be for another year.

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A 401(a) plan is a money-purchase similar to a 401(k) plan but is for employees of governmental organizations, educational institutions, non-profit organizations etc. It is sponsored by the employer who can select the contribution level, rules for eligibility, vesting etc (just as with 401(k) and 403(b) plans) subject to IRS limitations. Employee contributions can be mandatory or voluntary (as decided by the employer when the plan is set up) and they can be pre-tax or post-tax (again as set up in the plan) but employer contributions are mandatory even if the employee chooses not to make voluntary contributions. In this, they are different from 403(b) plans (I made (voluntary) contributions to a 403(b) for thirty years and my employer never put in a dime) and 401(k) plans in which the employer can choose to match voluntary employee contributions up to certain limits but doesn't need to put in a dime if the employee opts out of voluntary contributions entirely. Once upon a time, no contributions was the default and the employee needed to opt in to a 401(k) plan, but now I believe that the default in 401(k) plans is a 3% contribution (which triggers a matching employer contribution) and the employee must affirmatively opt out of participating in the 401(k). When the job ends, the employee has the option of rolling over the money into an IRA or a similar plan at another employer, taking a lump-sum distribution, or converting the accumulated money into an annuity at the rates determined by the plan. This is similar to what happens with 401(k) or 403(b) plans.

  • tl;dr: 401(a) requires the employer to contribute regardless of employee contributions, 403(b) does not? – GOATNine May 17 '18 at 17:25

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