small nfp -- 403b versus 401k

[Guest spoon]

We're a startup nfp/public charity and I heard recently that we could choose between a 403b or a 401k for employees. Is this accurate and what are the benefits of one over the other?

We currently have 4 employees, all with existing 401k that could be rolled over. I don't think we can afford to provide any match funds in 2009, but we hope to do as soon as we are able. Two of the current employees are fairly savvy investors while two are passive contributors. That ratio will skew toward passive investors as we grow.

We expect to grow exponentially in the coming years, and need a plan that will easily grow/adapt as we add employees...

[J Simmons]

There is much more certainty about the rules that apply to 401k plans than to 403b plans, and there are more professionals familiar with the 401k rules than the 403b rules. These alone ought to be considerable factors.

403b investments are either annuities or mutual fund-only accounts (or, if you are a "church" a retirement income accounts). 401k plans can be invested more broadly.

Fees associated with 403b investments have typically been higher than those in recent past with 401k investments.