Tax-Exempt Center of Excellence: Frequently Asked Questions

Tax-Exempt Center of Excellence: Frequently Asked Questions

Tax-Exempt Center of Excellence: FAQs


QUESTION: What federal laws govern a retirement plan?

ANSWER: The majority of private retirement defined contribution plans are governed by federal laws and guidelines in the Employee Retirement Income Security Act of 1974 (also known as ERISA) and the Internal Revenue Code. ERISA sets standards for most employer- and union-sponsored retirement plans in private industry and imposes responsibilities on those running the plan, such as the executive director or staff member in charge of human resources. The rules that apply under ERISA, however, do not apply to all retirement plans such as state and local government plans, including plans covering public school teachers and school administrators, most church plans, and plans for federal government employees. Also, if you are in a collectively bargained plan, the rules that apply under ERISA may be different in some cases.1

The IRS offers a sample 403(b) checklist2 that may be helpful to you during a basic plan review. It is no substitute for a comprehensive review that can assess if your plan is compliant — or how to get the plan into compliance.

1 - Sourced from U.S. Department of Labor
2 - Sourced from IRS

Please note that changes in the tax law may affect the information provided.



QUESTION: What benefits do most tax-exempt organizations offer?

ANSWER: All things being equal, the number one benefit in most tax-exempt organizations is healthcare; it’s a ‘have-to-have’ benefit. Beyond medical insurance, the second most commonly requested benefit is an adequate retirement plan. Most plan sponsors have a constant act of balancing their resources and benefits. There are many ways to structure a plan to optimize attracting and retaining employees.

QUESTION: What should a plan sponsor look for in a retirement plan provider?

ANSWER: Since every plan is different, we recommend plan sponsors look at the needs of the retirement plan and determine which are most important. This assessment will assist plan sponsors in determining the type of plan provider that will best suit their needs. For some organizations, they look for a plan provider that has a personalized and relationship-based approach to meet their retirement needs. Others look for plan providers that have extensive experience in the nonprofit industry, the ability to reduce their administrative burdens, or offer a comprehensive education program for their employees. We recommend plan sponsors have a baseline conversation with plan providers to determine the retirement plan’s needs, and then either build or reconfigure the current plan to create a program that helps employees achieve retirement security.

QUESTION: What challenges do tax-exempt plan sponsors face when sponsoring a retirement plan?

ANSWER: More often than not, tax-exempt plan sponsors place priority on directing their resources to fulfill their mission. This often requires employees to wear multiple hats. It may be beneficial to work with a plan provider that focuses on easing the administrative burden. Additionally, income is often received in the form of donations, grants and endowments. Because income may vary, selecting the appropriate plan design can be of particular importance.

QUESTION: Who is ultimately responsible for the compliance of the retirement plan? Is it the financial professional, plan provider or the plan sponsor?

ANSWER: The plan sponsor is ultimately responsible for the compliance of the plan. In reality, especially nonprofit organizations, many plan sponsors do not have this type of expertise in house and need to outsource it. Ultimately, it can be very expensive for the plan sponsor if it is not done correctly.

QUESTION: Why is it important that an outside source like a financial professional or plan provider representative review your plan?

ANSWER: There are many plan sponsors who have not reviewed nor optimized their retirement plans since the original plan’s implementation. Administering a retirement plan can be complex, which is why an annual review is very important. A surface-level analysis consists of reviewing funds, fees and fiduciary responsibilities. This review looks at the plan’s fees to see if they are competitive to industry standards, are investments performing relative to their benchmarks and is the retirement plan being run in the best interest of the employees. A deeper analysis might consist of examining additional plan options, reviewing operational improvements and/or recommending a course correction.

QUESTION: If a plan sponsor hires an outside source to review the retirement plan, what should an organization expect during the process?

ANSWER: If the plan provider is doing the review, the representative will want to know the basics such as plan operation, plan enrollment, participation and deferral rates, and employee education. Additionally, there will be a review of the plan documents to compare them to the plan’s actual practices. As an example, does the definition of compensation in the document match up with the payroll process? There are many small missteps that can cause issues for plan sponsors, but when reviewed, the organizations have an opportunity to improve the plan and possibly reduce plan costs and increase the benefits.



QUESTION: What should a plan sponsor expect regarding education?

ANSWER: Retirement education is more than the initial enrollment meeting. Ideally, it is a 12-to-18-month program or a consistent communication strategy that truly educates participants (and potential participants) about topics such as the importance of participating in the plan and the value of compounding and deferrals. Additionally, employees learn and consume content differently, so it is important to engage them in ways that resonate with their learning styles such as emails, short videos, podcasts, interactive tools, calculators and articles. For examples of these different mediums, we encourage you to look at the One Day is Today® online resources found at

QUESTION: Is retirement readiness and financial wellness education important for employees?

ANSWER: In 2015, our retirement services division professionals surveyed over 10,000 nonprofit and for-profit retirement plan participants to identify their knowledge levels across 10 retirement and personal finance-related topics. According to the survey results, only 40 percent of participants consider themselves either knowledgeable or very knowledgeable about retirement savings. To address this education need, we created a new area on for both plan sponsors and plan participants to access information and educational resources on financial wellness topics.


If you are interested in how we can assist you or would like more information about our retirement offerings, contact your financial professional or email and we can put you in touch with one.

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