IRS Highlights Retirement Plans as Key Retention Tool for Nonprofits

Retirement is part of retention now

At a small food-recovery nonprofit, the people who know which porch gets the green bag, which pantry can absorb a Friday surge, and which volunteer needs a reminder text are carrying more than their job descriptions. They are carrying institutional memory. That is why the IRS framing matters: retirement plans are not just a perk, they are one way a mission-driven employer signals that it expects people to stay long enough to build something durable.

The IRS says retirement savings plans can help tax-exempt organizations attract and retain better qualified employees, and its retirement-plan guidance for tax-exempt organizations was last reviewed or updated on April 8, 2026. For A Simple Gesture, that makes the question practical, not theoretical. If staff see retirement access as real and usable, the organization looks more like a career home and less like a temporary stop on the way to somewhere better.

What a 403(b) actually is

A 403(b) plan is also called a tax-sheltered annuity, or TSA, plan. The IRS says it is offered by public schools and certain 501(c)(3) tax-exempt organizations, and it works through individual accounts funded by employee salary deferrals, with employer contributions also possible.

The agency also points leaders to a comparison chart and several handbooks that matter for day-to-day administration: Publication 4483 for sponsors, Publication 4482 for participants, Publication 571 for employees of public schools and certain tax-exempt organizations, and a checklist for 403(b) plans. That mix is telling. The IRS is not treating retirement as a one-page benefit summary; it is treating it as an administrative system that needs to be explained clearly to workers and managed carefully by leadership.

For employees at A Simple Gesture, the real questions are simple: Am I eligible, how much can I put in, is there a match, and how do I keep the benefit from getting lost in the shuffle of a busy nonprofit schedule? If the answers are easy to understand, the plan can become part of the reason someone stays.

The rules that matter most

The IRS says 403(b) plans are subject to universal availability for elective deferrals, which means if any employee has the right to make elective deferrals, all employees generally must be eligible as well, with limited exceptions such as certain part-time employees. That rule matters in small organizations, where benefit design can otherwise tilt toward a few full-time roles while everyone else is left piecing together their own retirement security.

The contribution limits also shape what the plan can actually do for workers. For 2026, the elective deferral limit is $24,500. Employees age 50 and older can make an additional $8,000 catch-up contribution, and workers ages 60 to 63 can make the higher SECURE 2.0 catch-up contribution of $11,250. The annual additions limit is generally the lesser of $72,000 or 100% of includible compensation.

Those numbers matter because many nonprofit workers are not saving at the level they need. A TIAA-CREF Institute and Independent Sector survey found that about 45% of nonprofit employees were not confident they could prepare financially for retirement, and 42% felt they were not accumulating enough resources for long-term security. That is the backdrop for every benefits conversation inside a lean nonprofit: retirement insecurity is already in the room.

Why the sector is talking about this now

Retirement policy has become a visible issue across the nonprofit workforce, not just a back-office benefit question. Independent Sector convened funders, policymakers, researchers, and nonprofit leaders on July 16, 2024, then reported on the discussion on July 24, 2024. The conversation included voices such as Ben Harris, Will Hansen, Nancy Barry, Kevin Dean, Chitra Ayar, and Dr. Akilah Watkins, along with research from Just Futures and the American Retirement Association.

One of the biggest policy developments to watch is the Retirement Fairness for Charities and Educational Institutions Act. Independent Sector said the House passed it as an amendment in March 2024, and the measure would allow collective investment trusts in 403(b) plans. Independent Sector also noted a coalition letter submitted to the IRS in January 2024 criticizing the fact that SECURE 2.0 start-up tax credits do not include small nonprofits.

That exclusion matters because the nonprofit workforce is disproportionately shaped by small employers and by workers who have less margin for error. A July 2024 In These Times piece said more than one million nonprofit workers were excluded from SECURE 2.0 start-up tax credits, while 90% of nonprofit organizations meet the law’s small-employer definition and 40% have fewer than five employees. The same piece said women make up 69% of the nonprofit workforce and people of color 53%, which underscores why retirement access is not a niche concern. It is a workforce equity issue.

What this means inside A Simple Gesture

For A Simple Gesture, retirement policy is about more than compliance. This is a kind of work where continuity matters: volunteer recruitment, route coordination, pantry relationships, and neighborhood trust all depend on staff who know the system well enough to keep it running smoothly. If turnover is high, the organization does not just lose labor. It loses judgment, context, and the small operational habits that keep food moving where it is needed.

That is why leadership should treat a 403(b) as part of the retention package, alongside flexible scheduling, paid leave, and a path for growth. A retirement plan will not solve low wages or burnout on its own, but it can help answer a quieter question employees ask themselves: does this place expect me to build a future here, or just help out until I find something more stable?

If A Simple Gesture already offers a 403(b), staff should know the basics well enough to explain it clearly and use it confidently. If it does not, the IRS guidance gives leadership a useful framework for thinking through eligibility, contributions, and administration as part of a broader retention strategy.

The practical takeaway for staff and leaders

A good retirement benefit does three things at once: it protects workers, it simplifies expectations, and it makes it easier for a nonprofit to keep the people who know how the mission actually works. In a sector where budgets are tight and turnover can erase hard-won community knowledge, that is not a side issue. It is infrastructure.

The IRS has been building this framework for decades. Congress first created section 403(b) in 1958 for certain 501(c)(3) workers, extended it to public education employees in 1961, expanded it again in 1974 and 1982, and then imposed rules similar to qualified plans in the Tax Reform Act of 1986. The first comprehensive 403(b) regulations did not arrive until July 2007, after 43 years. That history helps explain why the plan can feel both familiar and complicated at the same time.

For nonprofits like A Simple Gesture, the larger lesson is clear: retirement access is not just about what happens after someone leaves. It is one of the clearest signals an employer can send about whether it wants people to stay long enough to matter.