What Is a 401(k) vs. 401(a) vs. 403(b)?

Learn the Differences Between Employer-Sponsored Retirement Plans

Planning for retirement can feel overwhelming, but understanding your options doesn’t have to be. In this article, we’ll walk you through the key differences between 401(k), 401(a), and 403(b) plans—so you know what each one offers and how to set yourself up for the retirement you want.

What Is an Employer-Sponsored Retirement Plan?

Employer-sponsored retirement plans are offered through your job to help you save for retirement. Employer-sponsored retirement plans like a 401(k), 401(a), and 403(b) get their name from the section of Internal Revenue Code (IRC) the governs the plan. Compared to individual retirement accounts (IRAs), these plans typically allow higher contribution limits. It helps to understand the difference between options like annuities and IRAs and employer-sponsored plans to create the best long-term savings strategy for your life. In this article we’ll focus the main types of employer-sponsored retirement plans, including unique tax advantages, contribution limits, and opportunities for employer funding of retirement savings.

What Is a 401(k)?

A 401(k) is the most common employer-sponsored retirement plan for private-sector workers. The most common types of 401(K)s are the traditional tax-deferred 401(k) and the Roth 401(k) funded with after-tax dollars.

How Does a 401(k) Work?

401(k) plans are elective, meaning you decide how much you want to invest each year (up to pre-determined contribution limits). How a 401(k) works depends on the type of plan you have set up with your employer:

• With a traditional 401(k) employees can contribute a portion of their paycheck to their plan before taxes are taken out, which helps lower their current taxable income. Taxes are deferred until funds are withdrawn from the plan.
• With a Roth 401(k) employee can contribute money from their paycheck after taxes are taken out, so they can be withdrawn in retirement tax-free.

Employers will often match contributions employees make to their 401(k) up to a certain percentage.

How Do Your Earn Money with a 401(k)?

Investments like mutual funds, money market funds, individual stocks, bonds, exchange-traded funds (ETFs), and target-date funds are typical for a 401(k). The investment options you choose can be adjusted based on the level of risk you are comfortable with.

What Are the Contribution Limits for a 401(k)?

Every year the IRS adjusts the contribution limits for 401(k)s and other employer-sponsored retirement plans. Here are the current contribution limits for 401(k) plans in 2025:

• Employee contribution limit: $23,500
• Standard catch-up contribution (age 50+): Additional $7,500
• Higher catch-up contribution (age 60-63): Additional $11,250

When Can You Start Contributing To a 401(k) Plan?

You can start contributing to a 401(k) plan after a year working with your employer. You have to be at least 21 to be eligible for a 401(k) and there is no age cut-off excluding older workers from saving in a 401(k) plan.

What Is a 401(a)?

A 401(a) is a retirement plan typically offered by government agencies, educational institutions, and non-profits. Because it is reserved for mostly government and non-profit workers, it is less common.

How Does a 401(a) Work?

401(a) plans are often mandatory, meaning both employees and employers have to contribute funds each year (up to set contribution limits). Mandatory contributions from an employer could include a fixed amount each year, employee matching contributions, or a set percentage of employee contributions.

Mandatory contributions are an appealing feature that’s designed as an incentive for employee retention in these fields, since employers do not have to contribute to 401(k) plans in the private sector. 401(a) plans are available as:

• A traditional 401(a) where taxes are deferred until funds are withdrawn from the account.
• A Roth 401(a) where taxes are paid before contribution, so funds grow tax-free.

How Do Your Earn Money with a 401(a)?

Comparing a 401(a) vs. 401(k), 401(a) plans typically have more conservative investment options to protect savings against market volatility. Common investment 

options for a 401(a) include lower-risk value-based stocks, governments bonds, or mutual funds.

What Are the Contribution Limits for a 401(a)?

Comparing a 401(a) vs. 401(k), 401(a) plans have more freedom with higher contribution limits, but there are also some unique limitations. Here are the current contribution limits for 401(a) plans in 2025:

• Total contribution limit (employer and employee combined): $70,000
• No catch-up contributions allowed

When Can You Start Contributing To a 401(a) Plan?

You can contribute to a 401(a) plan after two-years working for your employer. Employees must be at least 21 years old to be eligible for a 401(a) plan. There is no age limit for 401(a) plans.

What Is a 403(b)?

A 403(b) plan, also known as a tax-sheltered annuity plan (TSA), is a retirement plan made for employees of public schools as well as certain non-profits and religious organizations. It is designed for employees working at tax-exempt organizations.

How Does a 403(b) Work?

What is the difference between 401(k) and 403(b) and how does it work? Like a 401(k), employees make elective contributions to their 403(b) plan and can choose from 403(b) types like:

• A traditional 403(b) where contributions a made pre-tax, taxes are paid later when funds are withdrawn.
• A Roth 403(b) where contributions are taxed upfront, so funds grow tax-free.

How Do Your Earn Money with a 403(b)?

When looking at a 403(b) vs. 401(k), investment options can be more limited for a 403(b). Investment options for a 403(b) include assets like annuities and mutual funds.

What Are the Contribution Limits for a 403(b)?

403(b) plans have similar contribution limits to 401(k) plans. Here are the current contribution limits for 403(b) plans in 2025:

• Employee contribution limit: $23,500
• Standard catch-up contribution (age 50+ or after 15+ years of service): Additional $7,500
• Higher catch-up contribution (age 60-63): Additional $11,250

When Can You Start Contributing To a 403(b) Plan?

You can contribute to a 403(b) plan on your official starting date at work. Employees must be a least 21 years old for 403(b) plan eligibility. 403(b) plans have no age limit.

How Do Employer-Sponsored Retirement Plans Compare?

How do a 401(a) vs. 401(k) vs. a 403(b) compare? Read the chart below for a quick summary:

*Contribution limits as of 2025.

How To Choose the Right Retirement Plan for You

When it comes to retirement plans, each have their own benefits and drawbacks. Choosing the right plan will depend on your employment, financial goals, and retirement timeline. Consider:

• Who your employer is (public vs. private sector), this could limit what plans are available to you
• Whether employer contributions are offered
• What level of control you want over investment options
• Your income and ability to contribute to your retirement plan

Most retirement plans include some level of employer matching for contributions. Don’t leave earning on the table and make sure to maximize employer match programs to get the most out of your retirement savings.

Add Annuities to Your Retirement Strategy

Did you know you can roll over 401(k) funds into an annuity? Following Internal Revenue Service (IRS) rules for qualified retirement accounts, you can directly transfer a portion of your 401(k), 401(a), and 403(b) plan tax-free into an annuity which creates an IRA annuity. Designating a portion of your retirement savings for an annuity comes with real benefits like the assurance of lifetime monthly payments.

While employer-sponsored plans are a great start, adding annuities to your retirement mix can offer reliable income and protection from market volatility. Fixed annuities, in particular, provide predictable growth—making them a smart complement to 401(k), 401(a), and 403(b) plans.