One key difference between the 403(b) and 401(k) plans is who gets to use each type of plan:

—A 403(b) plan is used for some employees in the public sector, school districts, churches and non-profit organizations and charities.

—A 401(k) plan is used for employees in the private sector such as for-profit companies.

While these plans may be available for each sector, that doesn’t mean that your employer will offer a retirement plan at all.

In addition, employees of the public sector and some tax-exempt organizations may also have access to a supplemental savings plan in the form of the 457(b) account. The 457(b) provides even more opportunities to save and offers some especially advantageous features for workers.

403(b) and 401(k) contribution limits

Both plans have the same limits on what workers can contribute to the plans annually. In 2024 the annual limit on contributions is $23,000 in both 403(b) and 401(k) accounts for those under age 50. Those 50 and older can make catch-up contributions of an incremental $7,500 per year.

However, the 403(b) also offers a special catch-up contribution for workers who have 15 years of service or more with the same employer. Workers may be able to contribute up to $3,000 per year above the normal limits, up to a lifetime total of $15,000, provided they haven’t deferred more than the product of $5,000 times the number of years or service at the organization. Not all 403(b) plans offer this extra catch-up provision for 15 years of service, however.

Any employer match does not count toward the employee’s total annual contribution limit.

Key differences between 403(b) and 401(k) accounts

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