Affordable retirement plans for tax-exempt organizations.

ERISA is the primary federal law that sets the requirements for employee retirement and welfare benefit plans. 403(b) plans sponsored by nonprofit 501(c)(3) organizations may be exempt from ERISA if they meet certain requirements. Note: Human Interest does not service non-ERISA plans.

The main difference between 403(b) and 401(k) plans is that a 403(b) plan can only be offered by tax-exempt organizations. These organizations include but are not limited to, public schools, 501(c)(3) institutions, or cooperative hospital service organizations. 

403(b) plans are also exempt from most annual IRS nondiscrimination testing and can offer employees who have worked with a company for 15 years to make catch-up bonuses of $3,000 per year. 403(b) plans may only invest in mutual funds or annuities. 

The primary difference between 401(a) and 403(b) plans is eligibility and plan design. 401(a) plans allow employers to require enrollment for eligible employees and set contribution models. 403(b) plans do not require enrollment into the plan. 

403(b) plans have the same deadlines as most traditional 401(k) plans. Some of the major deadlines include: 

• January 15: Employers must submit the prior year’s census data to their plan’s recordkeeper. Census data is used to complete compliance testing. 

• March 15: Last day to distribute any required refunds to highly-compensated employees (HCEs) for failed ACP testing (403(b) plans are not subject to ADP testing).

• July 31: Calendar year plans are required to file Form 5500, which must be submitted to the DOL to satisfy required annual reporting under ERISA. This due date may be extended until October 15.

• December 31: Make any last-minute adjustments to your plan. This includes setting up a qualified retirement plan for the following year, signing plan document amendments, and distributing current year RMDs. 

However, the main difference is that 403(b) plans are not subject to ADP, or Top Heavy testing. ADP testing is meant to ensure that the average rates of employee contributions and the related company match are proportionate between highly compensated employees and non-highly compensated employees. 

Employees who are eligible to enroll in a 403(b) plan must be employees of one of the following: 

• 501(c)(3) tax-exempt organizations

• Public school systems

• Public school systems organized by Indian tribal governments

• Churches

• Ministers 

• Self-employed ministers

• Chaplains

For 2023, the limit on how much an employee can contribute to a 403(b) account is $22,500. Employees who are at least 50 years of age can also make catch-up contributions of $7,500. 

Note that if permitted by the 403(b) plan, an employee who has worked for the same organization for at least 15 years may be able to contribute $3,000 extra in addition to $7,500 for those 50 years or older.