The primary distinction will be the kind of employers who can provide them. In contrast to 401(k) plans that are provided by for-profit businesses, 403(b) plans are only accessible to workers of tax-exempt organizations. They are generally either schools, hospitals or religious groups. The names merely refer towards the section from the tax code that outlines these plans.
For probably the most component, the two kinds of plans function exactly the same way. But you will find other subtle variations. For instance, 403(b) plans will occasionally provide much more restricted investments options than corporate plans, which may consist of annuity contracts and mutual funds. But that might alter because of new regulations set to go into impact in 2009, which aim to create 403(b)s much more like 401(k)s. Whilst 401(k)s often have vesting schedules spread out more than a couple of years, numerous 403(b)s vest instantly, or more than a shorter time period than in their cousins within the for-profit globe.