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What’s the Difference? Pension vs. 403(b) Plan

Understanding retirement plans isn't easy... but it helps to know how different types of plans work to help build savings and provide income in retirement. Here's a brief description of how each of the two major types of retirement plans work—defined benefit plans (e.g, the current Support Staff Pension Plan) and defined contribution plans (e.g., the new 403(b) Staff Plan and most of the other JHU retirement plans).

The Support Staff Pension Plan is a "defined benefit" plan. With this type of retirement plan, you earn a benefit based on a formula. That formula takes into account your length of service, pay history, and your age when retirement income payments begin. You do not contribute to this plan. Johns Hopkins University pays the entire cost of the benefit.

The new 403(b) Plan, the Faculty and Senior Staff 403(b) Plan and the Staff Voluntary 403(b) Plan are all "defined contribution" plans. This type of retirement plan is designed to work like a savings account. You and the university can both make contributions to your account, and you decide how to invest your account balance in funds offered by the plan. Your benefit—or account balance—is based on the amount of contributions made (yours and the university's) and the investment gains or losses from the investment funds you elect. When you retire, you may receive your benefit in an annuity, installments or in a lump sum to reinvest elsewhere. If you leave Johns Hopkins University before you retire, you can take your account balance with you.

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