How to set up a 403(b) for your nonprofit

Many nonprofit employees dedicate their careers to helping others, but often struggle to save for retirement. Providing a 403(b) plan helps nonprofits of all sizes offer employees a simple way to save for the future. It can also support an organization’s commitment to employee well-being and long-term impact.

What is a 403(b) plan?

A 403(b) plan is an employer-sponsored, tax-advantaged retirement savings plan that works similarly to a 401(k). Employees can contribute deferrals from their paychecks on a pre-tax basis, meaning contributions are made before taxes are taken out. Employers may choose to allow participants to contribute Roth deferrals on an after-tax basis, meaning contributions are deducted after taxes are taken out. Employers can also match or add their own contributions.

For 2026, employees can contribute up to $24,500, plus an additional $8,000 in catch-up contributions for those aged 50 and older. A special $11,250 catch-up applies for those aged 60–63.

Learn more about 403(b) contribution limits here.

The main difference between a 401(k) and a 403(b) lies in who can offer them:

• 401(k): Private sector employers, including nonprofits.

• 403(b): Tax-exempt organizations and public education institutions.

Traditionally, 403(b) plans often utilized annuities from insurance companies. However, this is shifting under the SECURE Act 2.0, which expands investment options for numerous employers. 

Why nonprofits should offer a 403(b)

According to 2025 data, assets in 403(b) plans now exceed $1.5 trillion, representing nearly 160,000 plans and about 20 million participants—though much of that participation is concentrated in large educational or healthcare systems. Smaller community-based nonprofits often lack the resources or administrative support to offer savings plans, leaving millions of employees without access to a workplace retirement option.

As a Retirement Industry Disruptor™, Human Interest helps nonprofits bridge that gap by offering affordable, easy-to-manage retirement solutions that simplify plan setup and administration, so organizations can stay focused on their mission. 

Ready to make retirement access part of your impact? Get started today.

How to set up a 403(b) plan

To set up a 403(b) plan, you first need to choose a provider. Choosing a solution with transparent pricing, automated compliance, and robust support can make setting up and managing a 403(b) plan simple. With the right modern platform, organizations can help employees build financial security while staying focused on their mission.

Step 1: Review the IRS 403(b) pre-approved plan program

Begin by reviewing the IRS 403(b) pre-approved plan program, which provides model language, requirements, and resources to ensure compliance. Bookmark this section on the IRS website for sample templates and guidance on plan documentation.

Step 2: Establish a written 403(b) program

Most 403(b) plans require a written program that outlines mandatory provisions, including:

• Eligibility criteria

• Deferral limits

• Timing and form of distributions

Optional provisions may include:

• Catch-up contribution clauses

• Roth contribution options

• Loan provisions

Tip: If your organization operates under a larger umbrella or shares similarities with other nonprofits, you may use an IRS pre-approved plan as a foundation to streamline setup and maintain compliance with current regulations. The IRS keeps a list of 403(b) plans that you can tailor for use by your organization.

Step 3: Complete and file necessary IRS forms

Several IRS forms are required to establish and maintain your plan, including:

• Application for Approval of Section 403(b) Pre-Approved Plan

• Form 2848, Power of Attorney and Declaration of Representative

• Form 8821, Tax Information Authorization

If corrections are required, you may also need:

• Form 14568, Model VCP Submission Compliance Statement

• Form 8950, Application for Voluntary Correction Program

Ensure all forms are completed, signed, and converted to PDF before submission. If files exceed 15 MB, separate and fax additional documents as instructed by the IRS.

Step 4: Identify and fix plan errors early

Use the IRS 403(b) Fix-It Guide to spot common plan errors. Depending on the type of issue, you may qualify for self-correction or need to submit a Voluntary Correction Program (VCP) filing.

An example of an error is missing an adoption deadline for a written plan. Acting early can prevent costly penalties and maintain compliance.

Four strategies to minimize 403(b) setup costs

Setting up a 403(b) plan takes both time and attention to detail. Each step—from establishing a written program to filing IRS forms—requires accuracy to stay compliant and avoid potential penalties. Once your plan is in place, here are four practical ways to help minimize setup costs and maximize long-term value.

• Claim available startup tax credits An eligible employer that adds an auto-enrollment feature to their plan can claim a tax credit of $500 per year for a 3-year taxable period.

• Review all fees Some providers still rely on legacy pricing models: charging front-end loads, surrender charges, or “wrap” fees that reduce participants’ savings. Human Interest eliminates transaction fees and prioritizes transparent, predictable pricing to help nonprofits maximize plan value.

• Leverage tax deductions Employer contributions to a 403(b) plan qualify as tax-deductible, helping to reduce overall plan costs while rewarding organizations for supporting employee savings.

• Partner with a provider that supports regulatory alignment Look for a retirement solution that simplifies administration through automation, payroll integration, and proactive compliance oversight. Human Interest’s technology-driven approach helps reduce manual work, ensure timely Form 5500 filing, and keep your plan aligned with IRS requirements.

Why a 403(b) for nonprofits may be worth it

A workplace retirement plan remains one of the most sought-after employee benefits, and is a powerful way for nonprofits to attract and retain talented staff. Offering a 403(b) can help your organization extend its mission of support to those who make that mission possible.

Learn how Human Interest can help your nonprofit offer a modern 403(b) plan

Our transparent pricing, integrated payroll syncing, and built-in compliance support make it easy to set up and manage a 403(b) plan that fits your nonprofit’s mission.

Get started today.

Frequently asked questions about 403(b) plans for nonprofits

What types of organizations can offer a 403(b) plan?

403(b) plans are available to certain tax-exempt organizations, including 501(c)(3) nonprofits, public schools, hospitals, and churches. For-profit companies are not eligible to offer a 403(b).

How is a 403(b) different from a 401(k)?

Both plans allow employees to make pre-tax contributions toward retirement, but they differ in eligibility and investment structure. 401(k) plans are typically offered by private-sector employers, while 403(b) plans are designed for nonprofits and public institutions. Additionally, 403(b) plans often include annuity contracts as investment options, though newer plans increasingly use mutual funds.

Can nonprofits match employee contributions in a 403(b)?

Yes. Many nonprofits opt to offer employer matches, helping employees save more for retirement. The match amount is flexible—some companies match a percentage of employee contributions, while others contribute a flat amount regardless of the employee's participation level.

Should nonprofits work with a provider that offers multiple retirement plan options?

Yes. Choosing a platform that supports both 401(k) and 403(b) plans gives nonprofits flexibility as their organization grows. A retirement solution that offers a range of plan types can help you evaluate what best fits your staff, budget, and compliance needs without having to switch vendors later. Human Interest offers customizable 401(k) and 403(b) plans designed to scale with your organization.