A 401(a) plan is a type of retirement plan made available to those working in government agencies, educational institutions, and non-profit organizations. Eligible employees who participate in the plan include government employees, teachers, administrators, and support staff. A 401(a) plan's features are like a 401(k) plan, which are more common in profit-based industries. 401(a) plans do not allow employees to contribute to 401(k) plans.

If an individual leaves an employer, they do have the option of transferring the funds in their 401(a) to a 401(k) plan or individual retirement account (IRA) through a rollover to a different qualified retirement plan, a lump-sum payment, or an annuity.

A 401(k) plan is a workplace retirement plan that lets you make annual contributions up to a certain limit and invest that money for the benefit of your later years once your working days are done.

What Is the Main Benefit of a 401(k)?

A 401(k) plan lets you reduce your tax burden while saving for retirement. Not only do you get tax-deferred gains but it's also hassle-free since contributions are automatically subtracted from your paycheck. In addition, many employers will match part of their employee's 401(k) contributions, effectively giving them a free boost to their retirement savings.

What Is the Maximum Contribution to a 401(k)?

For most people, the maximum contribution to a 401(k) plan is $23,000 in 2024. If you are more than 50 years old, you can make an additional catch-up contribution of $7,500 for both years. There are also limitations on the employer's matching contribution: The combined employer-employee contributions cannot exceed $69,000 in 2024 (or $76,500 for employees over 50 years old) and $66,000 in 2023 (or $73,500 for employees over 50 years old).

What Is a 403(b) Plan?

A 403(b) plan is a retirement account designed for certain employees of public schools and other tax-exempt organizations. Participants may include teachers, school administrators, professors, government employees, nurses, doctors, and librarians.

The 403(b) plan is closely related to the better-known 401(k) plan, which means it allows participants to save money for retirement through payroll deductions while enjoying certain tax benefits. There's also an option for the employer to match part of the employee's contribution. Investors should keep in mind that there are contribution limits set by the Internal Revenue Service (IRS).

Participants can include:

• Employees of public schools, state colleges, and universities

• Public school employees of Indian tribal governments

• Church employees

• Employees of tax-exempt 501(c)(3) organizations

• Ministers and clergy members

The 403(b) plan has the same caps on yearly contributions that come with 401(k) plans. The maximum contributions allowed is $23,000 for 2024. Individuals who are 50 and over can contribute an additional $7,500 each year as a catch-up contribution. Combined employee and employer contributions are limited to the lesser of $69,000 in 2024 or 100% of the employee's most recent yearly salary.

What is a 457(b)?

A 457(b) deferred compensation plan is a type of tax-advantaged retirement savings account that certain state and local governments and tax-exempt organizations offer employees. Think: law enforcement officers, civil servants, and university workers. When you open a 457(b), typically you set aside pre-tax dollars in the account, reducing your income. Money in the account can be invested and potentially grow until you make withdrawals, at which point you'll pay taxes on what you take out. Depending on your employer plan there may be a Roth option, where you contribute post-tax dollars and then don't have to pay taxes when you take that money out.

There are 2 types of 457(b)s, each with different rules. And it's important to note that here in this article we cover 457(b) plans, not the similarly named 457(f) plans.

What is a governmental 457(b) plan?

Governmental 457(b) plans are sponsored by a government entity. Like with 401(k)s, your contributions are held in a trust and can't be claimed by your employer's creditors. Money saved in a governmental 457(b) can be rolled into other retirement accounts, such as IRAs and 401(k)s.

What is a non-governmental 457(b) plan?

A non-governmental 457(b) plan, sometimes called a tax-exempt 457(b) plan, is backed by the offering company—perhaps a college or other nonprofit. In a non-governmental 457(b), you tell your employer the percentage of your income you'd like to contribute, but the employer owns the account—not you. If that employer runs into trouble with creditors, your funds could be at risk.

Also, because the account is your employer's and not yours, you can't roll over funds from a non-governmental 457(b) plan into another retirement account and you may not have control over how the funds may be invested. And you can't take a loan backed by the funds in your non-governmental 457(b), like you can with a governmental plan. Another key difference: Whereas you could be automatically enrolled in a governmental 457(b), you have to elect to participate in a non-governmental plan.