Comparison of 457(b) Plans, 401(k) Plans, 403(b) Plans, and Deemed IRAs

Comparison of 457(b) Plans, 401(k) Plans, 403(b) Plans, and Deemed IRAs: "Comparison of 457(b) Plans, 401(k) Plans, 403(b) Plans, and Deemed IRAs
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Carol V. Calhoun, Shareholder
Calhoun Law Group, P.C.
9112 Lindale Drive
Bethesda, MD 20817-3441
Office Phone: (202) 441-5592
Telefax: (301) 564-1941
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The attractiveness of a 457(b) plan as compared with a 403(b) plan or a 401(k) plan may vary greatly depending on the circumstances. For example, a state or local governmental entity other than a public school or university may need to have a 457(b) plan, because it cannot normally have either of the other types of plans. A private university that is tax-exempt under Internal Revenue Code ('I.R.C.') § 501(c)(3) but maintains a health maintenance organization that is tax-exempt under I.R.C. § 501(c)(4) and/or taxable research subsidiaries may prefer a 401(k) plan, so that it can cover all employees under the same plan. A private school that does not have affiliates, and wants to provide only for salary reduction contributions, may find that a 403(b) plan gives it the greatest ability to cover rank-and-file employees while minimizing administrative requirements. A public or private nonprofit school or university that maintains a qualified defined contribution plan may want to have a separate 403(b) plan as well, since it need not combine 403(b) contributions with contributions to the school or university's qualified plans in applying the I.R.C. § 415(c) limits.
With the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 ('EGTRRA'), under which 457(b) plan defe"