403(b) vs 401(k): Key Differences
Understand how 403(b) plans compare to 401(k)s for public sector and nonprofit workers.
403(b) plans are similar to 401(k)s but are designed for nonprofit and public sector employees. For related deferred comp options, see 457(b) rules.
Key Takeaways
- Contribution limits are the same as 401(k) plans.
- 403(b) plans may have different investment menus.
- Some 403(b) plans allow additional catch-up contributions.
Similarities
- Pre-tax and Roth options may be available.
- Employer match rules are similar.
Contribution Limits (2025 vs 2026)
403(b) limits mirror 401(k) limits.
| Limit Type | 2025 | 2026 |
|---|---|---|
| Employee deferral (under 50) | $23,500 | $24,500 |
| Employee deferral (50-59 or 64+) | $31,000 | $32,500 |
| Employee deferral (60-63) | $34,750 | $35,750 |
| Overall limit (employee + employer) | $70,000 | $72,000 |
Key Differences
| Feature | 403(b) | 401(k) |
|---|---|---|
| Eligible employers | Public schools, nonprofits, churches | Private-sector companies |
| Investment options | Often limited to annuities and mutual funds | Typically broader fund menus |
| 15-year catch-up | Available for employees with 15+ years of service | Not available |
| ERISA coverage | Not all plans are ERISA-covered | Most plans are ERISA-covered |
| Vesting schedules | May differ; some nonprofits vest immediately | Varies by employer |
The 15-Year Catch-Up Rule
Some 403(b) plans allow employees with 15 or more years of service to contribute an extra $3,000 per year, up to a $15,000 lifetime cap. This is separate from the age-50 catch-up.
Rollover Options
403(b) funds can be rolled over to:
- A 401(k) at a new employer
- A Traditional or Roth IRA
- Another 403(b) plan
See: 401(k) to IRA Rollover Guide for rollover mechanics and pitfalls.
Strategy Tip
Use the same Roth vs Traditional analysis as a 401(k): Roth vs Traditional tax tradeoffs. Compare the impact using your marginal tax rate and effective tax rate.
Related reading:
How sharper.tax Helps
When you upload your tax return to sharper.tax, we identify your retirement contribution activity and evaluate whether you are maximizing your 403(b) or 401(k) benefits. We model Roth vs Traditional tradeoffs based on your actual income and bracket. Sophisticated tax planning used to require a high-end CPA---we make it available for free.
Sources
The information above is educational and not tax advice.