U.S. Department of Labor Blog
New guidance from the Employee Benefits Security Administration and Center for Faith offers tailored information to help faith-based employers select retirement plans that meet the needs of their organizations.
Small, faith-based organizations play an important role not only in their communities, but also in the lives of their employees. As an employer, you have a significant opportunity to provide meaningful retirement benefits that meet the specific needs of your employees and support their financial futures. Your organization may also be eligible for plan options that aren’t available to secular workplaces.
Here are five things to consider when weighing your options:
1. What do you want for your employees?
What benefits do you want your employees to have? Who will be eligible? Will your plan cover part-time employees or only full-time? Will the organization contribute money to employee accounts? Will employees be automatically enrolled? How will you communicate plan options to your staff?
2. What kind of plan is right for you?
How big is your organization? How much are you willing to spend? Do you have the skills or staffing to handle a more complex plan arrangement? In plain language, our new guidance can help you:
- Determine your corporate status and what kind of plans you’re eligible to sponsor.
- Understand the difference between Individual Retirement Arrangements (IRAs), defined contribution plans, defined benefit plans, pooled employer plans, 403(b) plans, and other options.
- Compare different plan types and select the kind that best fits your faith-based organization.
3. Are you eligible for a “church plan”?
Faith-based organizations (like churches, synagogues, mosques, religious schools, hospitals with religious ties, or certain faith-based nonprofits) may be eligible to establish “church plans.” The distinction is important because church plans can be exempt from some federal retirement plan requirements, including from provisions of Title I of the Employee Retirement Income Security Act (ERISA).
As a faith-based employer, you can choose to establish an ERISA plan or a non-ERISA church plan, if you are eligible. ERISA plans have more legal protections for employees, but generally come with more reporting, paperwork, and oversight. Non-ERISA church plans generally have fewer regulatory hurdles, but offer fewer employee protections.
4. What legal or administrative issues might arise?
Be aware of IRS rules for tax-deferred retirement accounts, and how potential legal changes might impact the types of plans you’re considering. Also consider administrative and paperwork requirements. Operators of ERISA plans have to file Form 5500 paperwork every year. While non-ERISA plans don’t have that requirement, they may have additional paperwork requirements with the IRS.
5. Where you can you get help?
Retirement plans can get complicated – but you don’t have to go it alone. Our new guidance is a great place to start, explaining how different plans work and outlining eligibility requirements, potential tax credits, advantages, and employer responsibilities. You can also contact our Benefits Advisors with questions about your responsibilities when you offer a retirement plan.
Daniel Aronowitz is the assistant secretary of the U.S. Department of Labor’s Employee Benefits Security Administration. Kenneth J. Wolfe is the director of the Department of Labor’s Center for Faith.
