Why Do I Have Both a 401a and 403b?
Understand why you might have both a 401(a) and a 403(b) from public or non-profit work, and how to coordinate these plans within your retirement strategy.
Discovering you have both a 401(a) and a 403(b) retirement account can be perplexing, but this situation is not unusual for individuals in public education, government, and the non-profit sector. These fields often provide layered retirement benefits, where one plan is a mandatory, employer-driven account and the other is a voluntary, supplemental savings vehicle. The existence of both is a deliberate feature of many public service benefits packages.
This arrangement arises because the plans are governed by different sections of the Internal Revenue Code. A 401(a) is common for government entities, while a 403(b) is designed for public schools and non-profit organizations. Understanding the purpose of each plan is the first step toward optimizing your retirement strategy and making the most of the benefits available to you.
The 401(a) Plan Explained
A 401(a) is a tax-advantaged retirement plan available to employees of government agencies, educational institutions, and certain non-profit organizations. Unlike the more common 401(k), enrollment in a 401(a) is often a condition of employment, making participation mandatory.
The contribution structure is set by the employer, requiring both the employee and employer to contribute a fixed percentage of the employee’s salary. For instance, an employer might contribute 5% of an employee’s salary, and the employee may also be required to contribute a set amount. In some governmental plans, these mandatory employee contributions can be designated as “picked up” by the employer, allowing them to be treated as pre-tax employer contributions. This structure makes the 401(a) function much like a traditional pension plan.
The employer also holds significant control over the plan’s investment options, which are often conservative and may include government bonds or value-based stock funds to prioritize stability.
The 403(b) Plan Explained
A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement savings vehicle for employees of public schools, 501(c)(3) tax-exempt organizations, and certain ministers. Its structure and function are comparable to a 401(k) plan. Participation in a 403(b) is voluntary, allowing employees to decide whether to enroll and how much of their salary to defer into the account.
Because of its voluntary structure, a 403(b) often serves as a supplemental savings tool, allowing employees to contribute additional funds for retirement beyond what is contributed to a primary plan like a 401(a). Investment options are traditionally restricted to annuity contracts issued by insurance companies or mutual funds held in custodial accounts.
While the employer selects the available investment providers, the employee chooses how to allocate their contributions among the offered funds. The plan must also adhere to a “universal availability” rule, which requires that if an employer permits one employee to make salary deferrals, it must extend the offer to nearly all employees.
Common Scenarios for Holding Both Accounts
The most frequent reason for having both a 401(a) and a 403(b) is working for a single, complex employer that offers both as part of its benefits package. For example, large public university systems that operate medical centers might enroll a professor, as a state employee, in a mandatory 401(a) plan. Simultaneously, the university can offer a voluntary 403(b) plan to allow employees to save additional pre-tax dollars for retirement.
Another path to accumulating both accounts is through a change in employment over a career. An individual might start as a teacher contributing to a 403(b) plan, then later accept a position at a state agency where the primary plan is a 401(a). If the funds from the original 403(b) are not rolled over, the individual will retain both accounts.
Concurrent employment is a third scenario. A person could work full-time for a city government, participating in its mandatory 401(a) plan, while also holding a part-time job at a non-profit hospital. If that non-profit offers a 403(b) plan, the employee would be eligible to participate, resulting in them contributing to both plans.
Managing Contributions and Rollovers
When contributing to both a 401(a) and a 403(b), different IRS limits apply. The limit on employee salary deferrals applies to your voluntary contributions to the 403(b). For 2025, this individual limit is $23,500, and it includes total elective deferrals to other plans like a 401(k). Mandatory employee contributions to a 401(a) do not count toward this specific limit.
A separate, overall limit caps the total annual additions from both employee and employer to all plans of a single employer. For 2025, this limit is $70,000 or 100% of your compensation, whichever is less. This cap includes your voluntary 403(b) deferrals, any employer match, and all mandatory contributions to the 401(a).
You can often roll over funds from both a 401(a) and a 403(b) into a traditional IRA or into a new employer’s qualified plan, if that plan accepts rollovers. Consolidating accounts can simplify management, potentially lower administrative fees, and provide a wider array of investment choices. A direct rollover is the simplest way to avoid tax consequences.
However, keeping the accounts separate may have advantages. Some governmental 401(a) plans offer unique features, such as stable value funds that are not available in IRAs, or specific loan provisions. You should evaluate the investment options, fees, and features of each plan to decide whether to consolidate or manage them separately.