Skip to main content
No. of Recommendations: 3
Here goes: Internal Revenue Code Section 401(a) defines (in all of its subparts) what constitutes a "qualified" retirement plan (a plan sponsored by an employer for the benefit of its employees that has certain tax advantages). ALL qualified retirement plans are, in fact, 401(a) plans. All of the other plans people talk about are specialized retirement plans defined in the subparts of 401(a). So, for example, a 401(k) plan is a 401(a) plan that contains provisions for employee salary deferrals, and the tax benefits contained in it. Code Section 401(k) is a section that defines a certain type of permissable contributions allowed in a plan qualified under 401(a). 403(b) is a section that incorporates many of the provisions (some modified) into a scheme that functions to provide retirement benefits to employees of not-for-profit organizations. It was at one time thought that not-for-profits couldn't (or shouldn't) pay as much in wages and provided some more liberal provisions for retirement plans sponsored by them. most of the differences have been eliminated (albeit some remain) and 403(b)'s tend to look more like 401(k) plans.

A 401(a) plan that provides only for employer contributions would simply be a qualified retirement plan that hasn't implemented the optional provisions of 401(k) relating to salary deferral contributions. Such is the case with pure profit sharing plans (a 401(k) is really a profit sharing plan with a 401(k) feature), a "money purchase pension plan (where an employer promises to contribute a determined amount each year (without regard to profits - or even cash flow), or a "traditional" pension plan that pays a monthly benefit pursuant to a formula (usually based on years of service and final average compensation - such as 2% times years of service time the average of monthly pay over the last five years of employment).

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.