What types of retirement plans can not-for-profit organizations use? Help employees save for retirement and provide an employee benefit by setting up an employer-sponsored retirement plan. Learn the pros and cons of each option.

This is a release of a 2019 video, but the main thing that has changed is the maximum dollar limits. Also, the quality of these videos is slightly better now…

Nonprofits have traditionally used 403b plans, for the most part. That’s still an option, and may even be the best option for some organizations. But you may also benefit from using 401k plans or IRA-based plans (like a SIMPLE IRA) for your staff.

See the pros and cons of different types of retirement plans. We’ll look at administrative fees, maximum contribution limits, matching and profit-sharing contributions, features like loans, and the ability to make after-tax Roth contributions to your retirement plan. There’s also the issue of discrimination testing, which can be an issue for some employers.

403b plans have some unique features. Small, private nonprofits (not government, church, or school, for example) don’t always get the most out of those plans, but we’ll highlight a few of the most interesting strategies you can use with a 403b in the right circumstances.

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With this information, hopefully you’re on your way to choosing the right retirement plan for your nonprofit.

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IMPORTANT: Verify all information with a CPA before you open any accounts or take any action. This information may be inaccurate or may not apply to your circumstances.

In many cases, nonprofits can use 403(b) plans, 401(k) plans, SIMPLE IRAs, payroll deduction IRAs, and more. Even defined benefit pension plans (as well as non-qualified deferred compensation plans) work for some organizations….(read more)

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As a nonprofit organization, it is important to offer a retirement plan to your employees as part of your overall compensation package. However, with multiple options available in the market, it can be challenging to determine the most suitable plan for your nonprofit. The two most popular retirement plans for nonprofits are 403(b) and 401(k) plans. Additionally, nonprofits can also opt for other plans such as SEP and SIMPLE IRA plans. In this article, we’ll explore the key differences and benefits of each plan to help you make an informed decision.

403(b) Plan
A 403(b) plan, also known as a tax-sheltered annuity plan, is a retirement plan offered to employees of public schools, charities, and some non-profit organizations. It is similar to a 401(k) plan in terms of contribution limits, loan provisions, and investment options. However, the main difference is that 403(b) plans are only available to employees of certain non-profit organizations and government agencies.

One of the significant benefits of a 403(b) plan is that it allows employees to contribute up to $19,500 in pre-tax dollars annually, and those who are fifty years and older are allowed to contribute even more under a “catch-up” provision. Additionally, the plan also offers a wide range of investment options such as mutual funds, annuities, and stocks.

401(k) Plan
A 401(k) plan is a retirement plan commonly offered by for-profit organizations for employees to save on a tax-deferred basis. However, nonprofit organizations can also offer 401(k) plans to their employees. Like the 403(b) plan, the 401(k) plan allows employees to save money pre-tax, meaning they won’t pay taxes until they receive distributions.

Like the 403(b) plan, contributions to 401(k) plans are limited to $19,500 per year, plus an additional $6,500 catch-up contribution allowed for employees aged 50 and above. Additionally, the employer can choose to match a portion of their employees’ contributions, which is a great way to attract and retain top talent.

SEP and SIMPLE IRA Plans
Apart from the 403(b) and 401(k) plans, nonprofits can also offer Simplified Employee Pension (SEP) and Savings Incentive Match Plan for Employees (SIMPLE) IRA plans. These plans are designed to be cost-effective and easy to maintain, making them ideal for small nonprofits. The key difference between the two is the contribution limits.

With a SEP IRA plan, employers can contribute up to 25% of an employee’s salary or $58,000 (whichever is lower) annually. On the other hand, SIMPLE IRA plans allow employees to contribute up to $13,500 per year in pre-tax dollars, plus an additional $3,000 catch-up contribution for those aged 50 and above. Employers are required to contribute either a dollar-for-dollar match or a 2% nonelective contribution.

Conclusion
All of the retirement plan options mentioned in this article have their benefits and limitations, and it is crucial to identify the plan that best suits your organization’s needs. Before deciding on a plan, it is advisable to consult a financial advisor to help you understand all the options available and determine the best choice based on your organization’s size, budget, and recruitment goals. Offering a retirement plan for your nonprofit organization can help increase employee satisfaction, attract top talent, and boost company retention rates.