Understanding Non-401K Employer Retirement Plans

Employee access to retirement plans often depends on the size of the company you work for, along with the type of employer. The most popular retirement plan among private employers is the 401K. Other plans include 403B, 457, and TSP or Thrift Savings Plans.

All the above retirement options have similar features, and most mimic the rules of a Traditional IRA. Namely, you gain a tax deduction on contributions and do not pay taxes until withdrawing funds. Accessing funds before 59 ½ typically result in a 10% withdrawal penalty unless you meet one of the few exceptions. You must begin withdrawals by age 70 ½. The IRS taxes distributions as ordinary income.

A 403b retirement plan is a tax-sheltered annuity offered by tax-exempt organizations such as schools, hospitals, and religious organizations. The accounts have the same limits as a 401K, allowing you to add up to $18,000 and anyone over 50 can contribute up to $24,000 annually. Companies have the option of matching funds which can extend annual deposits up to $54,000 or 100% of annual compensation. After 15 years of employment, you may add another $3,000 per year as a catch-up contribution for up to 5 years.

A 457-retirement plan provides access to employees of local and state governments. The organizations can match contributions, and you may deposit up to $18,000 annually. The catch-up contributions begin at age 50 or 3 years from retirement and allow you to deposit up to $36,000 annually.

Thrift Savings Plans or TSPs provide federal, civil service employees and members of the military with retirement savings and includes an employer match. The organization may provide a plan under the Traditional IRA or Roth IRA rules. Under the Roth accounts there is no initial tax deduction, but instead, offer tax-free withdrawals at retirement. Contributions follow the 401K guidelines allowing a maximum annual contribution of $18,000 and an additional $6,000 for everyone over 50.