Practice Quiz

FINRA Series 6

Category - Series 6

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The essential difference between a 401(k) plan and a 403(b) plan is that:
  1. the 403(b) plan is for small businesses while the 401(k) plan is for large corporations.
  2. only employers can contribute to 403(b) plans while both employers and employees can contribute to 401(k) plans.
  3. the 403(b) plan is for employees of specific non-profit organizations whereas the 401(k) plan is for the employees of private corporations.
  4. contributions to 403(b) plans are always tax deductible, which is not the case with 401(k) plan contributions.
Explanation
Answer: C - The essential difference between a 401(k) plan and a 403(b) plan is that the 403(b) plan is for employees of specific non-profit organizations whereas the 401(k) plan is for the employees of private corporations. The tax advantages and eligibility requirements of a 403(b) plan are the same as those for a 401(k) plan.
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