403(b)s: Similar but Different

Much has been made over the last few years about how 403(b) plans compare with other types of defined contribution (DC) plans, including 401(k)s, 457s, money purchase plans, profit-sharing plans, employee stock ownership plans (ESOPs) and nonqualified deferred compensation (NQDC) plans. In many ways, 403(b)s are similar to other types of DC plans. However, as revealed in the “2018 PLANSPONSOR Defined Contribution Industry Report – 403(b) Plans,” there are some areas of striking contrast.

403(b)s, offered by nonprofits, educational institutions, hospitals and other such organizations, have an average participation rate somewhat similar to that of other DC plans: 71% vs. 79%, respectively. But there is a stark difference between average balance in 403(b) plans ($56,730) and 401(k) plans ($97,903). This could be somewhat linked to the fact that 29% of 403(b) plan sponsors also offer defined benefit (DB) plans, compared with only 19% of DC plans overall.

When it comes to loan provisions, 403(b) plans are slightly less likely to have one, with 76% offering this feature and 79% of all DC plans doing so.