Dick Shafer is an expert on 401(k) and 403(b) retirement plans. While 401(k) plans are most common, public schools and non-profits typically offer 403(b) plans. Both plans provide similar tax benefits to employers and employees, including employer matches, elective contributions, and Roth or rollover options. However, 403(b) plans have simpler investment and testing rules, and in some cases allow higher contribution limits. Overall, the minor differences favor 403(b) plans for non-profit organizations.

1. THE DIFFERENCE
BETWEEN 401K AND
403B RETIREMENT
PLANS
Dick Shafer, Madison

2. Introduction
 Richard (Dick) Shafer serves as the executive director
of Well and Good LLC, a Madison, Wisconsin-based
registered investment advisor that specializes in
providing investment recommendations to retirement
plan fiduciaries. Before taking this role in Madison,
Dick Shafer was senior manager of 401(k) plan
products and services at CUNA Mutual. Before that,
while at TIAA, Dick led a broad-based coalition to
achieve transparency of 403(b) products in California
public schools and community colleges.
While 401(k) is the most widely-used Code section for
employer-sponsored defined contribution retirement
plans, public education and entities exempt from
taxation under Code 501(C)(3) usually offer a 403(b)
plan.

3. Retirement Plans
 Whether established under Code section 401(k) plan
or 403(b), plan tax benefits are almost exactly the
same: Employers may make matching or non-
matching contributions, employees may arrange
elective contributions, the plan may allow Roth or
rollover contributions.
However, the rules for investing and non-
discrimination testing are simpler in 403(b) plans and,
in some instances, contributions may be higher.
Although any one of the differences may not seem
significant, in aggregate they lead most 501(c)(3)
organizations to initially establish and maintain their
defined contribution plans under Code 403(b).