Defined Contribution Retirement Plan Types

Your employer may sponsor one or more defined contribution retirement plan types, depending on the work you and your coworkers do, and other factors. In general (but not exclusively):

  • 457(b) deferred compensation plans serve governmental employees
  • 401(k) plans serve private sector employees and some public workers
  • 403(b) plans serve employees of schools, public health and other tax-exempt organizations

All three plan types have similar contribution limits, but may limit when you can take money without penalty.

Pre-tax and after-tax

These plans offer the opportunity to save for retirement through payroll deduction of pre-tax dollars. In exchange, withdrawals are taxed as ordinary income. Some employers have added a Roth contribution option, allowing workers to save after-tax dollars in exchange for getting tax-free income in retirement.

Keep in mind that investing involves market risk, including possible loss of principal. As you get started in the plan, we’ll help you understand market risk and strategies that may help you deal with it.

Other plans

401(a) – Employers may also set up one or more 401a plans, which may allow or require contributions by the employee, the employer, or both. If your employer offers a 401a and you qualify for participation, your Retirement Specialist can explain your options.

Post Employment Health Plan (PEHP) – Employers may establish a tax-free defined contribution health reimbursement arrangement (HRA) which allows them to set aside money for the payment of medical expenses that retirees will incur after they leave employment. If your employer offers a PEHP and you qualify for participation, your Retirement Specialist can explain your options.

These plans may be less flexible than 457b, 401k and 403b plans, but may allow advantages – such as much higher contribution limits – for workers who are enrolled in them.

Get the help you need

Talk with one of our Retirement Specialists to see what plan type(s) your employer provides.

Remember that information provided by Retirement Specialists is for educational purposes only and is not intended as investment advice. Neither Nationwide nor our representatives offer tax or legal advice. Consult your own counsel before making any decisions.

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