Employer Sponsored Plans

401(k), 403(b), 457 Plans

These are tax-advantaged retirement savings plans offered by different types of employers. Employees contribute a portion of their salary into these plans, often with employer matching.

 401(k):

• Offered by private-sector employers.
• Contributions are pre-tax (traditional) or after-tax (Roth), and grow tax-deferred (or tax-free for Roth).
• Annual contribution limits apply (e.g., $23,000 for 2025 under age 50).
• Employers can match contributions up to a limit.
  

403(b):

• For public schools, non-profits, and certain religious organizations.
• Works similarly to a 401(k) but may have different investment options (often annuities or mutual funds).
• Eligible for higher catch-up contributions in some cases.
  

457:

• Offered by government and some non-profit employers.
• Also allows pre-tax or Roth contributions.
• Key benefit: No early withdrawal penalty (unlike 401(k)/403(b)) if you leave your job, even before age 59½.

 Profit Sharing Plan

• A retirement plan funded solely by the employer.
• Contributions are discretionary—employers decide if and how much to contribute each year based on company profits.
• Contributions are typically allocated based on employee salary, and grow tax-deferred.
• Often combined with 401(k) plans to enhance retirement benefits.

Defined Benefit Plan

• A traditional pension plan where the employer promises a specific retirement benefit amount, usually based on salary and years of service.
• The employer bears the investment risk and is responsible for funding the plan adequately.
• Benefits are often paid as a monthly income for life during retirement.
• Becoming less common in the private sector due to cost but still used by government and union employers.

Non-Qualified Deferred Compensation (NQDC) Plan

• A plan for highly compensated employees or executives to defer income above IRS limits for qualified plans.
• Contributions and growth are tax-deferred, but there are fewer protections than in qualified plans.
• The funds are not held in a protected trust—they are technically company assets until paid, so they are subject to company creditors if the business fails.
• Often used as part of executive compensation strategy.