Difference between 401k vs. 403b?

[Guest judynyc61]

I started working this week as the HR Manager for a museum (a non profit organization) that offers a 401k because they piggy-backed onto a parent (profit company) plan existing plan. However, the jig is up and we have to start a new plan, either a 401k or 403b as of 1/06. I need to determine if as a non profit, we can even have a 401k (I always thought non profits had to have 403b's). Basically I need to know the differences between 401k's vs. 403b's, pros and cons and if we opt for a 403b can there be an employer match, if the employee does, or does not contribute into the plan. HELP!!!!!!!!

[Leopurrd]

You may want to visit www.403bwise.com. It's a very resourceful website if you are trying to find out more about 403b plans. In particular, the FAQ's are great for someone who is new to the 403b vs 401k arena.

http://www.403bwise.com/faqs/index.html

[Guest LVanSteeter]

Who is your current service provider? Can they assist you with this? Many of the larger companies have great expertise and would be willing to help with plan documents IF they would be getting the assets to recordkeep/trustee.

[wmyer]

Tax exempt entities can have either a 403(b) or a 401(k) plan (or both). There are many advantages to having a 403(b) plan -- for example, no discrimination testing for employee deferrals (ADP test), easier nondiscrimination testing for nonelective employer contributions, simplified 5500 reporting to the IRS with no audit requirement. Both types of plans can have employer matching contributions (which are tested for ACP). However, employees are generally more aware of what a 401(k) plan is than what a 403(b) is; so, there could some communication benefits if you adopt a 401(k). Proposed 403(b) regulations will make 403(b) more like 401(k) plans. As a tax exempt organization, you may also want to consider a 457(b) plan for the museum's executives. There are many more issues, and you may want to engage the services of a benefits consultant to help you through this decision.

[Guest tigbenefits]

Carol Calhoun, one of the moderators of this site, has a great comaprison on her website, benefitsattorney.com. It shows the two plans side-by-side.

[david rigby]

The tendency to post the same message twice will get you advice, but it will be "spread out".

http://benefitslink.com/boards/index.php?showtopic=29683