403(b) or 401(k): Which Plan to Choose If Your Employer Offers Both
For hospital workers, university staff, and nonprofit employees who have access to both plan types. A systematic 7-point checklist, three worked examples, and specific questions to ask HR. Updated 17 April 2026.
Who has access to both plans
Dual-plan situations arise most often at: large hospital systems (many offer a 403(b) through the nonprofit hospital entity and a 401(k) through a for-profit subsidiary or management company), universities with both nonprofit and for-profit arms, large nonprofits that have grown to include taxable operations, and organisations that have been through mergers or acquisitions where employees retained access to multiple legacy plans.
The 7-point decision checklist
Which plan has lower expense ratios?
The single most important question. Get the average expense ratio for each plan's investment options. Compare like for like: an index fund in each, or the default target-date fund in each. A difference of 1% per year costs you roughly $100,000 over 30 years on a $100,000 balance.
Which plan offers index funds?
Low-cost index funds (S&P 500 index, total market index, bond index) are the baseline for comparison. If one plan offers only actively managed funds or annuities, and the other offers Vanguard or Fidelity index funds, the index fund plan wins on fees almost every time.
Which plan has an employer match?
If only one plan has a match, start with that plan and contribute enough to get the full match. Then direct additional contributions to the lower-fee plan. Never miss the match regardless of fee differences.
Do both plans have a match? How do they compare?
If both plans offer a match, calculate the total match value from each. Contribute enough to get each full match, then direct remaining savings to the lower-fee plan. The combined employee deferral limit ($23,500) applies across both plans.
What is the vesting schedule on each match?
A 3-year cliff vesting schedule means you forfeit the match if you leave before year 3. If you plan to change jobs within 3 years, factor vesting into your comparison.
Does either plan offer a Roth option?
If one plan offers Roth and the other does not, and you prefer Roth contributions, that is a factor. Both plans otherwise function identically on this dimension.
Do you need loan access?
Both plan types can offer loans, but not all do. If you anticipate needing a plan loan, check which plan offers it and on what terms.
Worked examples
Example 1: Hospital system
403(b) is annuity-based (Voya, 1.8% average fee). 401(k) has Vanguard index funds (0.05% fee). Both match 4% of salary.
VERDICT: 401(k)
1.75% fee difference x $50,000 balance x 30 years = approximately $193,000 in lost growth. Get the 403(b) match minimum, then direct all additional contributions to the 401(k).
Example 2: University
403(b) is TIAA mutual fund window (0.15% average fee). 401(k) is Fidelity managed funds (0.35% average). Match is only on the 403(b).
VERDICT: 403(b)
The 403(b) wins on both criteria: lower fees and the only employer match. Contribute primarily to the 403(b). The 401(k) is only worth adding if you want extra contributions beyond $23,500 (not possible as employee contributions are combined).
Example 3: Nonprofit with for-profit subsidiary
Both plans match up to 3% of salary. 403(b) fees: 0.8%. 401(k) fees: 0.5%. You earn $80,000.
VERDICT: Get both matches, then prioritise 401(k)
Contribute 3% to each plan to get both $2,400 matches ($4,800 total). Then direct remaining budget to the lower-fee 401(k). Employee contribution limit ($23,500) applies across both combined.
What to ask HR (in writing)
- Q1.Can you provide the Summary Plan Descriptions for both the 403(b) and 401(k) plans?
- Q2.What is the average expense ratio of the investment options in each plan?
- Q3.Does each plan have a mutual fund window or index fund options?
- Q4.What is the employer match formula and vesting schedule for each plan?
- Q5.Which plan has a true-up provision if I front-load contributions?