403(b) Plans

Determine that your nonprofit is eligible for 403(b) retirement plans 403(b) plans can be established as retirement accounts for employees of public and private schools, colleges and universities, charities, religious groups and other non-profits.

I recommend:  Check with the IRS for eligibility requirements before setting up a 403(b) plan.

Understand the rules for 403(b) savings plans 403(b) plans, once established, are open to everyone in your organization. The term for this is universal availability. There are a few exceptions. Students, part-time employees, employees who have a collective bargaining agreement and non-resident aliens are all exceptions to the universal availability clause.

I recommend:  The number of employees covered in 403(b) plans determines the cost. Your 403 retirement plan must remain in compliance with IRS regulations. Problems with the organization's retirement plan can adversely affect 501(c)3 status. Lincoln Investment Planning offers a guide to universal eligibility for 403(b) accounts.

File the paperwork for your 403(b) accounts 403b plans do require extra work on the employers part, but properly managed, it is minimal. While some organizations choose to manage their employees retirement plans in-house, it makes more sense to allow the financial services company to handle this chore. This way, each employee can choose their investment vehicle, without putting addition pressure on the employer's payroll staff. The employer must also indicate on the employee's W-2 that the employee is participating in a 403b plan, the amount of deferral, and also check mark the box that states the employee is participating in a pension plan.

I recommend:  Companies such as Sterling Trust allow your employees to make contributions to 403(b) accounts through them. They will also help each employee with investment choices. Once you have completed the initial set-up of the 403(b) retirement plan, you will have little extra paperwork to complete.