Key Takeaways
While 403(b) plans are exclusive to certain tax-exempt and public education organizations, 401(k)s are available to nearly all employers, including nonprofits and for-profit companies.
Both plans share similar contribution limits, Roth options, and tax advantages to help employees save effectively for retirement.
403(b)s are often simpler to maintain and may have reduced compliance requirements, whereas 401(k)s offer more investment flexibility and broader organizational eligibility.
What nonprofits should know about 403(b) and 401(k) plans
Nonprofit leaders can play a vital role in helping employees save for the future. Depending on their structure, budget, and compliance needs, many organizations choose to offer a 403(b), a 401(k), or both.
Offering a workplace retirement plan not only supports employees’ long-term financial well-being but can also help attract and retain talent in a competitive hiring landscape. As a Retirement Industry Disruptor™, Human Interest helps nonprofits provide modern and easy-to-manage 401(k) and 403(b) plans designed to make retirement access approachable for everyone.
Extend your organization’s impact by helping employees save for the future.
What is a 403(b)?
A 403(b) plan, sometimes called a tax-sheltered annuity (TSA), is a retirement savings plan available to specific public and nonprofit organizations.
Eligible employers include:
501(c)(3) nonprofit organizations
Public schools and certain educational institutions
Cooperative hospital service organizations
Religious or charitable ministries
Certain organizations governed by tribal or federal charters
Employees can contribute pre-tax dollars—or after-tax through a Roth option—which helps reduce taxable income while saving for the future. Employers may also match contributions to support long-term employee engagement and retention.
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Simplify setup with automated tools and built-in compliance support.
What is a 401(k)?
A 401(k) plan is one of the most common employer-sponsored retirement options. Unlike a 403(b), nearly any company—including both for-profits and nonprofits—can offer one. 401(k)s provide a broader range of investment choices and greater flexibility in plan design, allowing organizations to tailor contributions, matching structures, and vesting schedules to their workforce.
Nonprofits that anticipate structural changes, such as becoming a different type of corporate entity, may prefer a 401(k) for its portability and scalability.
403(b) vs. 401(k): How do they compare?
Although they’re structured differently, both plans share several similarities that help employees save for retirement:
For 2026, both plans have a maximum annual contribution limit of $24,500.
Employees aged 50 and older can make an additional $8,000 catch-up contribution, while many aged 60–63 are eligible for a special $11,250 catch-up under SECURE Act 2.0 provisions.
Most employees are eligible to participate, depending on the organization’s plan rules.
Combined employee and employer contributions are limited to the lesser of $72,000, or $80,000 for employees 50+, and $83,250 for those aged 60–63.
Either plan type can be terminated under the plan’s governing rules if an organization’s needs change.
Both plans offer pre-tax and Roth deferrals, employer matches, and vesting schedules that can adapt to organizational goals. The table below highlights how each plan differs:
| Feature | 403(b) Plan | 401(k) Plan |
|---|---|---|
| Eligible employers | Public schools, 501(c)(3) nonprofits, and select public organizations | Nearly all employers, including nonprofits and for-profits |
| Investment options | Mutual funds and annuity contracts | Broad investment choices, including mutual funds and managed portfolios |
| Catch-up options | 15-year service-based and age 50+ | Age 50+ catch-up only |
| ERISA coverage | Often exempt, depending on structure | Generally subject to ERISA |
| Compliance testing | Fewer requirements (often only ACP test) | Requires annual nondiscrimination testing |
How to decide between a 403(b) and a 401(k)
Choosing between a 403(b) and a 401(k) depends on your organization’s structure and long-term goals.
Smaller nonprofits may appreciate the streamlined compliance and simplicity of a 403(b).
Growing organizations that want expanded investment options or anticipate corporate transitions may benefit from a 401(k).
Hybrid approach: Some nonprofits offer both plan types to give employees additional flexibility.
Whichever option you choose, selecting a retirement platform that facilitates setup and ongoing administration can help your organization stay focused on its mission.
Tip: Look for a solution that integrates with payroll, simplifies IRS filings with tools such as a Tax Savings Maximizer, and reduces manual oversight so your team can stay focused on its mission.
Human Interest streamlines both 401(k) and 403(b) administration
At Human Interest, we believe retirement plans should be accessible to every organization, regardless of size or sector. Our modern platform automates administrative and compliance work across both plan types, helping nonprofits save time, reduce errors, and stay aligned with regulations.
Key advantages include:
Transparent, predictable pricing
Automated compliance support and IRS form management
Integrated payroll syncing to minimize manual work
Robust account management and dedicated support
Whether you choose a 403(b), a 401(k), or both, offering a retirement plan can help your nonprofit empower employees and strengthen its mission. Partnering with Human Interest can help you deliver an affordable retirement benefit built for today’s workforce.
Learn how Human Interest can help your nonprofit set up and manage a 403(b) plan or 401(k) plan designed for your team’s needs.
Maximize Your Nonprofit’s Benefits With the Right Retirement Strategy
Learn the differences between a 403(b) and a 401(k), and let Human Interest help you to choose the option that is best for your organization.
Frequently asked questions
Can nonprofits offer both a 403(b) and a 401(k)?
Yes. Some nonprofits choose to offer both plan types to provide flexibility and meet diverse employee needs.
Can employees make Roth contributions?
Yes. Both 401(k) and 403(b) plans may offer a Roth deferral option, allowing employees to contribute after-tax income for tax-free withdrawals in retirement.
Do employers have to match employee contributions?
No, but many choose to. Employer matching can help strengthen recruitment, retention, and employee satisfaction.
Are 403(b) plans less expensive to maintain?
Potentially. Because some 403(b) plans are exempt from certain ERISA requirements, they may involve fewer administrative costs. Choosing a retirement solution like Human Interest can also help minimize expenses through automation and transparent pricing.
Article By
Trenton ReedTrenton Reed is the Manager of Content Strategy at Human Interest. He has over a decade of experience writing for Fortune 500 and SMB companies across finance, technology, and other verticals.
