Government employees can use 403(b) plans, but only if they work for certain types of employers

A 403(b) plan is available to you as a government employee only if you work for a public school system, a public college or university, or a tax-exempt organization that is not a traditional government agency. If you work for a federal, state, or local government department — like a city planning office, state highway patrol, or county health department — your employer does not offer a 403(b). Instead, you would have access to a 457(b) plan, which is the retirement savings vehicle designed specifically for government workers in those roles.

The confusion happens because public schools and public universities are government employers, but they are allowed to offer 403(b) plans. If you teach in a public school or work in administration at a public university, you likely have a 403(b) available to you. The key difference is that schools and universities operate under different tax rules than other government agencies.

Key Takeaways

  • Public school teachers and staff can use 403(b) plans; other government employees typically cannot.
  • Federal, state, and local government workers outside of schools and universities are offered 457(b) plans instead.
  • Public colleges and universities may offer 403(b) plans to their employees, similar to schools.
  • If you are unsure whether your employer offers a 403(b), check with your human resources or payroll department directly.

Which government employers offer 403(b) plans

Public school systems across the country offer 403(b) plans to teachers, administrators, counselors, and support staff. This includes elementary schools, middle schools, and high schools run by school districts. Public universities and colleges also commonly offer 403(b) plans to faculty and staff members.

Tax-exempt organizations that are not government agencies — such as nonprofits, hospitals, and religious institutions — also offer 403(b) plans. These are not government employers in the traditional sense, but they operate under the same tax rules that allow them to sponsor 403(b) plans.

Government agencies that do not offer 403(b) plans include federal departments (like the Department of Veterans Affairs or the Social Security Administration), state agencies (like a state department of transportation), and local government offices (like a city assessor's office or county clerk's office). These employers sponsor 457(b) plans instead.

How 403(b) plans differ from 457(b) plans for government workers

The main difference is the contribution limit. For 2024, a 403(b) plan allows you to contribute up to $23,500 per year (or $31,000 if you are age 50 or older and your employer allows catch-up contributions). A 457(b) plan has the same base limit of $23,500, but the catch-up rules work differently, and the total you can set aside may vary depending on your employer's plan design.

Another difference is what happens to the money if you leave your job. With a 403(b), you can roll the balance into an individual retirement account (IRA) or another employer plan. With a 457(b), the rules are stricter — you generally cannot roll the money into an IRA, and you must follow your plan's specific rules for what you can do with the balance.

Both plans allow you to withdraw money before age 59½ without the usual 10 percent early withdrawal penalty if you separate from service (leave your job). This is a significant advantage for government and school employees who may retire before traditional retirement age.

How to learn about your government job offers a 403(b)

The simplest way is to contact your human resources department, payroll office, or benefits coordinator. They can tell you when ready whether your employer sponsors a 403(b) plan and provide you with enrollment information and plan documents.

If you work for a public school, ask your school's main office or district office. If you work for a public university, contact your institution's human resources or benefits office. If you work for any other government agency and are unsure, ask your payroll department — they will know whether you have a 403(b) or a 457(b).

You can also check your most recent pay stub. If a 403(b) or 457(b) contribution appears on it, you already have an account. The pay stub will show which type of plan you are in.

What to do if your government employer does not offer a 403(b)

If you work for a government agency that does not offer a 403(b), you should have a 457(b) plan available to you. A 457(b) works similarly to a 403(b) — you contribute pre-tax money from your paycheck, and the money grows tax-deferred until you withdraw it in retirement.

If your employer does not offer either a 403(b) or a 457(b), you can open an individual retirement account (IRA) on your own. A traditional IRA allows you to contribute up to $7,000 per year (or $8,000 if you are age 50 or older). The money you contribute may be tax-deductible depending on your income and whether you have access to a workplace retirement plan.

You can also open a Roth IRA, which works differently — you contribute after-tax money, but the withdrawals in retirement are tax-free. An IRA is not as powerful as a 403(b) or 457(b) because the contribution limits are much lower, but it is a solid backup option if your employer does not sponsor a workplace plan.

Frequently Asked Questions

Can a federal government employee use a 403(b)?

No. Federal employees are offered a 457(b) plan through the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). A 403(b) is not available to federal workers outside of public schools or universities.

Do public school teachers always have a 403(b)?

Most public school systems offer a 403(b) plan to teachers and staff, but not all. Some school districts may offer only a pension plan or a different retirement vehicle. Check with your school district's benefits office to confirm what is available to you.

Can I have both a 403(b) and a 457(b) at the same time?

If you work for a public school or university that offers both plans, yes — you can contribute to both in the same year. However, your combined contributions to both plans cannot exceed the annual limit set by the IRS. Check with your benefits office about how your employer handles this situation.

What happens to my 403(b) if I leave my government job?

The money stays in your account and continues to grow tax-deferred. You can leave it there, roll it into an IRA, or roll it into another employer's plan if you move to a new job. You cannot withdraw the money penalty-free until age 59½ unless you meet certain exceptions.

Is a 403(b) the same as a pension for government employees?

No. A pension is a may provide monthly payment in retirement based on your years of service and salary. A 403(b) is a savings account that you and your employer contribute to, and the amount you have in retirement depends on how much you saved and how well it grew. Many government employees have both a pension and a 403(b).