My Match is so Small!

Public Sector 403(b) employer match vs. Private Sector 401(k) employer match

Stop Comparing! When you compare 403(b) matching benefit given by a school district to participating employees, to the benefit of a private-sector 401(k) employee, you are correct, the match dollar amount is less in a 403(b). Let’s look at the difference in most 401(k) and public-school retirement benefits to understand why, and if it is really as ‘bad’ as it appears.

Private sector employees and the 401(k)-match

Employees in the private sector may have a 401(k)-retirement plan available to save for their retirement. The maximum an employer may contribute to the participating employees’ 401(k) is 6% of salary. This is given in the form of a match, meaning if the employee chooses to contribute 6% of their salary, the employer will match that contribution with a 6% contribution. If the employee contributes 13% of their salary, the employer will match 6%. If the employee contributes 2% of their salary, the employer will match 2%.

When the employee retires, their 401(k) balance is what they have available to supplement their social security. If the employee retires with a 401(k) balance of $500,000, this $500,000 needs to last them through their retirement years. If they spend all their 401(k) balance, they are left with social security for income.  The employee does have a risk that they may outlive their 401(k)-account balance since pension plans are no longer common in the private sector.

Public sector employees and the 403(b)-match

Retirement benefits offered to public school employees in the State of MN include Pension, MN Teachers Retirement Association (TRA) for licensed teachers and Public Employees’ Pension Association (PERA) for non-licensed employees.   These types of pension plans are no longer available in the private sector.  Employees are automatically enrolled in these benefits accordingly, like automatic participation in social security.  

  • Looking at your paycheck stub, a licensed teacher will see their TRA contribution rate is 7.5% of salary; the employer is contributing (matching) 7.71% of your salary to your account.[1] Yes, the employer is matching more than your contribution at this time!   Please refer to the for the contribution schedule.
  • Non-licensed staff will see their PERA contribution rate is 6.5% of salary; the employer is contributing (matching) 6.5% of your salary to your account.[2]

Like social security, you can’t outlive pension!   A pension benefit will pay you for your lifetime and possibly a beneficiary, depending on how you set it up.

In addition to pension, public school employees have the option to participate in the 403(b) benefit.   Based on your employment contract, you may receive an employer match.    The employer match is a ‘buy-down’ of the former retirement severance package, which is why the matching contribution is less.    Please refer to my blog “In the beginning” for an education on how the severance package became the matching benefit. 

I choose to look at the 403(b) match in public-sector employment as a “Second Match.”   The first match is the match to the pension (TRA or PERA), which is technically higher than the 401(k) match.   The second match is the 403(b) match.


This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice.  If you are seeking investment advice specific to your needs, such advice must be obtained on your own, separate from the educational material.  Content in this material is for general information and is not intended to provide specific advice or recommendations for any individual.   1-963495