Plans for Educators and
Employees of Nonprofit Organizations
One can never accuse the IRS of being overly creative. Like the 401(k) and the 457, the agency named the 403(b) retirement plan for the section of the Internal Revenue Code that governs it.
403(b) tax-sheltered annuity plans are similar in many ways to the 401(k). Both types of plans let you contribute a portion of your salary into a tax-deferred retirement account. The big difference between the 403(b) and the 401(k) lies in the types of employers who can offer them.
Put simply, 403(b) plans can be offered only by public schools, colleges and universities, churches and entities that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code. A 401(k) plan on the other hand can be offered by both for-profit and nonprofit organizations.
Like 401(k)s, 403(b) plans can be offered in conjunction with other retirement plans, such as a profit sharing plan, and also may include a Roth 403(b) deferral option.