(b)lines Ask the Experts – The Demise of 403(b)s?

January 11, 2011 (PLANSPONSOR (b)lines) – “Down the road, do you believe that 403(b) plan designs will be eliminated in favor of 401(k) plans or a uniform plan design?”

Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:    

Given the regulatory trends, one could reasonably surmise that the ultimate goal is for 403(b) to be eliminated in its entirety. And in fact, there are proposals put forth from time to time for uniform retirement accounts that would eliminate and 403(b)/401(k) differences. However, there are still many areas in which 403(b) and 401(k) plans are miles apart: nondiscrimination, special contribution limits (church and 15-year) and permissible investments, just to name a few.   

Some of these features are more favorable in one plan type than another, and what would be difficult to work out is whether a more favorable or less favorable feature would be retained in any surviving plan type.  At the current pace of regulation, assuming the trend continues, it would still take some time before 403(b) plans and 401(k) plans are identical.  


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.