401(a) vs. 403(b): What You Need to Know

If you work for a public school or some kind of non-profit organization, you may have access to a 401(a) or a 403(b) plan. Both plans are retirement savings vehicles that offer major tax breaks. However, they are structured a bit differently. We’ll define both plans and explain the pros and cons of each.

We can also help you find a financial advisor to help you create a personalized retirement-planning roadmap.

Key Differences: 401(a) vs. 403(b) Plans

Here is an overview of some of the major differences between 401(a) vs. 401(b) plans for retirement:

Mandatory or voluntary participation. A 401(a) plan is generally mandatory for eligible employees, with the employer deciding contribution rates and rules. Employers must contribute, and sometimes employees are required to contribute as well. By contrast, a 403(b) plan is usually voluntary, and employees decide how much of their paycheck to defer. Employers may contribute, but it isn’t required.
Investment options. A 401(a) plan usually offers mutual funds picked by the employer or plan administrator. Meanwhile, a 403(b) plan often relies on annuity contracts from insurance companies, though mutual funds may also be available. These choices affect the risk, fees and growth potential of the account.
Contribution limits. The 401(a) allows very high combined employer and employee contributions, often far above what a 403(b) permits. A 403(b) has lower elective deferral limits. However, it provides catch-up contributions for employees who are age 50 or older, and in some cases, the special 15-year service rule may further boost contributions.
Flexibility. The 401(a) plan is highly structured and controlled by the employer, which can limit employee choices. A 403(b) plan generally gives workers more freedom to decide how much to contribute and whether to use catch-up provisions.

Overall, the best plan for you depends on your employer and your retirement goals. If your workplace offers both, compare contribution opportunities, investment options and flexibility before deciding how to allocate your savings.

What Is a 401(a) Plan?

A 401(a) plan is an employer-sponsored retirement plan that functions similarly to a 401(k). The main difference is that private companies typically sponsor 401(k) plans. Conversely, government agencies, educational institutions and non-profits typically sponsor 401(a) plans.

In addition, 401(a) plan sponsors typically enjoy a greater degree of control in plan structure. For instance, it is up to an employer to decide on eligibility requirements. In most cases, employers make it mandatory for eligible employees to enroll so that employees can save for their retirement and take advantage of tax incentives. The IRS makes it mandatory for employers to contribute to their own employees’ 401(a) plans. This rule applies even if the sponsor decides to make employee contributions optional.

Employers also decide on the vesting schedule and contribution structure of a 401(a). An employer can decide to defer a set percentage of each employee’s salary or paycheck into their corresponding plan. The rate can be set for the life of the plan, or the employer can allow employees to change it at a specific point during the year.

Tax Benefits of 401(a) Plans

Beyond just the mechanics of a 401(a) plan, the savings vehicle also enjoys a similar tax treatment to the 401(k) plan.

When you invest in a 401(a) plan, you typically contribute pre-tax dollars (though some employers may also offer an after-tax 403(b) plan). This means your employer deducts your contribution from your paycheck before Uncle Sam takes a big cut. As a result, it effectively reduces your taxable income. In addition, you may qualify for tax credits based on your contributions for the year.

Depending on your employer, you can choose from a range of investment options to contribute to. These typically include stocks, bonds and mutual funds that established investment firms manage. While your money stays in the plan, it grows tax-free. So unlike your standard brokerage account, Uncle Sam won’t tax the interest, dividends or capital gains each year.

However, you will owe regular income tax when you make qualified withdrawals. You generally can make these once you reach age 59 ½. Otherwise, you’d owe a 10% early withdrawal penalty in addition to income tax on the amount, unless you meet one of the IRS exceptions.

401(a) Contribution Limits

A 403(b) plan is a tax-advantaged retirement account for employees of public schools and certain nonprofit organizations.

For 2026, the contribution limit for a 401(a) plan is $72,000. This limit applies to the total contributions you and your employer make. But if you make less than the contribution limit, the IRS will only permit you to contribute up to the total amount of your salary.

This means that if you made $45,000 in 2026, that is the maximum you and your employer can contribute to your 401(a) for the year, even though it is less than the $70,000 limit. Of course, you’d need most of your pay to cover living expenses. Regardless, the contribution limit for any 401(a) participant is generally higher than those of other types of plans.

What Is a 403(b) Plan?

A 403(b) plan is a tax-advantaged retirement plan typically reserved for employees of public schools and 501(c)(3) organizations. They are often offered by public schools, cooperative hospital organizations, 501(c)(3) tax-exempt organizations and religious institutions.

Sponsors of 403(b) plans decide on eligibility requirements for the plan. The IRS generally restricts them to establish accounts as one of the following, however:

An annuity contract with an insurance company
A custodial account that invests in mutual funds
A retirement income account investing in annuities or mutual funds for religious organization employees

Most 403(b) plan investment menus tend to offer annuity options from insurance companies.

Tax Benefits of 403(b) Plans

In terms of tax treatment, a 403(b) functions similarly to a 401(a). You make pre-tax contributions, and your money grows tax-free. You will owe regular income tax on eligible withdrawals, which also begin at age 59 ½. The 10% early-withdrawal penalty rule generally applies to withdrawals made before that point.

Additionally, 403(b) plans often have higher contribution limits compared to other retirement plans, and individuals aged 50 and older can make catch-up contributions, providing an opportunity to save more as retirement approaches.

403(b) Plan Contribution Limits

403(b) plan contribution rules can get pretty complex, so it’s helpful to have a breakdown.

Under IRS rules, employees can contribute up to $24,500 in “elective deferrals” toward their 403(b) accounts in 2026. Elective deferrals refer to money taken out of your salary or paycheck and put into the plan. If your employer contributes to your plan, it can contribute up to an extra $47,500 in “annual additions.” Plus, if you’ve capped out your elective deferrals and you’re at least 50 years old, you can make additional “catch-up” contributions worth $8,000 in 2026.

However, if you make less than the annual total contribution limit ($72,000 in 2026), your maximum equals your total annual compensation. For example, if you made $45,000 in 2026, that’s the maximum that you and your employer can contribute toward your plan for the year. Simply put: Your maximum contribution limits equal your total annual earnings.

Your plan may also allow the “15-year” catch-up rule. If you’ve worked for your employer for at least 15 years and your average annual contributions were less than $5,000 during those years, you could contribute an additional $3,000 per year, capped at $15,000 for a lifetime. And if you’re at least 50 years old, you can take advantage of both types of “catch-up” contributions.

But make sure you check your plan to see if they allow this additional catch-up contribution. If so, also ensure you’re aware of the rules behind it.

Other Potential Contribution Features of 403(b) Plans

Some 403(b) plans include contribution provisions that go beyond the standard annual limits. One example is a tenure-based rule that may apply to employees who have worked for the same eligible employer for many years and historically contributed less than allowed. If the plan permits it, this provision can allow additional deferrals, subject to a cumulative lifetime cap.

403(b) plans may also allow employees to choose between pre-tax and Roth deferrals. When Roth contributions are available, participants fund the account with after-tax income, and future qualified distributions are excluded from taxable income. Choosing between these options affects how and when taxes are paid, but not the overall contribution ceiling.

Age can also influence how much an employee is permitted to defer. Beyond the standard catch-up amount available after age 50, some plans offer higher deferral limits for participants in their early 60s. These expanded limits apply only to employee contributions and do not increase the combined employer-plus-employee cap.

Because these features depend on how a specific plan is written, availability varies by employer. Reviewing plan documents or speaking with a plan administrator can clarify which contribution options apply when calculating your allowable deferrals for the year.

Bottom Line

A 401(a) plan is usually mandatory with employer-set contributions, while a 403(b) is typically voluntary with options shaped by the employer.

Ultimately, 401(a) and 403(b) plan function similarly. The main differences lie in who is eligible to enroll in each as well as the plan design of the one(s) that an employer happens to offer. In general, sponsors of 401(a) plans make it mandatory for eligible workers to enroll in the plan. However, they contribute to their employees’ plans as well and typically also set contribution models. In contrast, 403(b) plans tend to make this step voluntary. Beyond this, specific aspects of both 401(a) and 403(b) plans, like the available investment options, depend solely on the discretion of your employer.

Tips for Your Retirement

Your retirement strategy involves more than just an employer-sponsored retirement plan. You can also factor in Social Security benefits. To help you crunch the real numbers, we developed the best retirement calculator around.
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