A defined contribution plan is a type of retirement plan in which the employer, employee or both make contributions on a regular basis.
The most common types of employer-sponsored retirement savings plans are called 401(k), 403(b) or 457 plans – so named for the Internal Revenue Service tax codes that govern them – and Thrift Savings Plans. Each has a different target audience:
- 401(k) plans are offered to employees of public or private for-profit companies.
- 403(b) plans are offered to employees of tax-exempt or non-profit organizations, such as public schools, colleges, hospitals, libraries, philanthropic organizations, and churches.
- 457 plans are offered to employees of state and local municipal governments (and some local school and state university systems).
- Thrift Savings Plans are offered to federal civilian and uniformed services employees.