401k vs 403b if both are offered

[NY_GU]

Hey guys, my wife is a fellow and working at an institution that offers both a 401k and a 403b retirement account. In my basic understanding of these two tax-deferred account it does not seem to have a big difference which she contributes to. Is there a purpose to funding both (assuming thats allowed) or just keep it simple and choose one. Both allow the same investing options. Thank you!

[The White Coat Investor]

Weird. Sure it's not a 401(a) and a 403(b)?

[truphao]

I agree, I have never seen an organization offering both type of plans. Something does not add up.

[NY_GU]

Both are really an option! She can enroll in either.

[spiritrider]

I'm with WCI on this. Are you very, very sure it is not a 401a. It would be extremely unusual to have a 401k and 403b. If it is true the two are really an option:

• There is a single employee deferral limit across all 401k, 403b and SIMPLE IRA plans.
• There would be separate 401k and 403b (employee + employer) annual addition limits.
• 403b (employee + employer) annual additions are aggregated with businesses owned > 50% by the 403b participant.
• The 401k plan is ERISA Title I qualified. The 403b may not be.
• I would recommend the 401k, especially if doing any moonlighting.

[jfoxcpacfp]

Denise Applebees, Investopedia star retirement writer, appears to be aware of this option but I have never heard of it either, fwiw. Since you presented us with the (literal) black and white evidence, SR’s advice is solid, as usual (ho hum😅).

[NY_GU]

Thanks everyone!

[afan]

We have both.
The 403(b) was the older plan. They introduced the 401(k) later. Both are still active and one can contribute to either. There is an overall contribution maximum for employer and employee funds. Same for both plans. Cannot stack the 401 on top of the 403 to save more.
There are more investment choices in the 401(k).
One can invest through a brokerage window in the 401(k) but not the 403(b). Thus individual stocks and bonds are available only in the 401(k). For TIPS and other Treasurys one would have to use the 401(k). Mutual funds (and annuities) only in the 403(b). This forces people to go through a tortuous process to transfer funds from one or the other.
Besides that, they are identical and the employee level.
At our place, both have the while-working exemption that lets one avoid RMDs past RMD age as long as they are still working for the employer.
When logging into the account, we see both plans, their totals and how the money is invested in each one.

I believe that there are some asset protection advantages of 401(k) over 403(b). Apparently, there are some 403(b) plans that are not covered by ERISA. Have never tracked that down to find the details.

[spiritrider]

I believe that there are some asset protection advantages of 401(k) over 403(b). Apparently, there are some 403(b) plans that are not covered by ERISA. Have never tracked that down to find the details.

Generally, the employer must be engaged in administration of a 403b plan for it to be an ERISA qualified plan. Any employer match or non-elective contributions makes it ERISA. To be non-ERISA, administration including transfers between vendors must not be administered by the employer.