Waddell & Reed

Non-profit Organization and Church

Whether you're a not-for-profit clinic, a nursing home or the Humane Society, your employee retirement program must suit your particular needs as a tax-exempt organization. Waddell & Reed offers retirement benefit plan options to help meet the needs of non-profit entities under IRC 501(c)(3), churches and church-controlled organizations.

What is a 403(b)(7)/TSA?
A tax-sheltered account (TSA) is an employer-sponsored retirement plan for 501(c)(3) organizations where plan assets are invested in a 403(b)(7) mutual fund account. A 403(b)(7) plan is generally funded by employee salary deferrals.

403(b)(7) At A Glance

Administrator Testing None.
Establishment All plans must have a written plan document.
Employee Contribution Limit Maximum employee deferral is the lesser of 100 percent of income or $17,000.
Catch-Up Contribution Up to $5,500 for participants age 50 or older.
15 Years Special Salary Deferral Contribution You may have the potential to contribute up to an additional $3,000 per year, with a life time limit of $15,000. Special rules apply.
Employer Contributions Churches may provide an employer discretionary or match up to 25 percent limit combined.
Vesting Employee contributions are 100 percent vested.
Loans Available Yes, if employer elects in the Plan Adoption Agreement.
Employee Eligibility Requirements Universal coverage of employees required.
Total Employee/Employer Maximum Contribution $50,000 (churches only).
Total Employer/Employee Maximum Contribution With Catch-Up $55,500 (churches only).

403(b)(7) Benefits

Employer Benefits

  • Generally, 403(b) plans funded solely by employee salary deferrals do not require the filing of an annual IRS Form 5500.
  • Attract and retain quality employees
  • Improved employee morale, productivity and employer/employee relations.

Employee Benefits

  • Save for retirement with pre-tax dollars.
  • Earnings are tax deferred until withdrawn.
  • Contribution limits are greater than those of IRAs.
  • Contribution amounts are flexible.
  • Special salary-deferral contribution limits for tenured employees may allow for greater retirement savings.

What is ERISA Title One 403(b)?
The ERISA Title One 403(b) is an employer-sponsored retirement plan for 501(c)(3) organizations. These plans are subject to the annual governmental testing and reporting requirements of Title One of ERISA.

ERISA Title One 403(b) At A Glance

Administrator Testing Required annually.
Establishment New plans must be established by the employer’s fiscal year end.
Employee Contribution Limit Maximum employee deferral is the lesser of 100 percent of income or $17,000.
Catch-up Contribution Catch-up provision of up to $5,500 for participants age 50 or older.
Employer Contributions 25 percent company limit on discretionary and matching contributions combined.
Vesting
  • Employee contributions are 100 percent vested.
  • Employer contributions may be subject to a vesting schedule if elected by the employer in the Plan Adoption Agreement.
Loans Available Yes, if employer elects on Plan Adoption Agreement.
Employee Eligibility Requirements
  • One year with 1,000 hours of service.
  • 21 years old.
Total Employee/Employer Maximum Contribution $50,000.
Total Employee/Employer Maximum Contribution With Catch Up $55,500.

ERISA Title One 403(b) Benefits

Employer Benefits

  • Design an arrangement similar to a 401(k) that includes matching contributions and other employer contributions.
  • Attract and retain quality employees.
  • Improved employee morale, productivity and employer/employee relations.

Employee Benefits

  • Save for retirement with pre-tax dollars.
  • Earnings are tax deferred until withdrawn.
  • Contribution limits are greater than those of IRAs.
  • Contribution amounts are flexible.
  • Special salary-deferral contribution limits for tenured employees may allow for greater retirement savings.

What is a SIMPLE IRA?
The Savings Incentive Match Plan for Employees (SIMPLE) was designed for employers with 100 or fewer eligible employees. A SIMPLE IRA allows employer and employee contributions and keeps plan administration responsibilities to a minimum.

SIMPLE IRA At A Glance

Who May Establish
  • All business types.
  • For-profit and not-for-profit organizations with 100 or fewer employees.
Administrator Testing None.
Establishment New plans must be established by October 1 of the year for which the plan is to be effective.
Employee Eligibility Requirements
  • Earned at least $5,000 in compensation in each of the previous two years
  • Earn at least $5,000 in compensation for the current calendar year.
Excludable Employees Certain union employees or non-resident alien employees.
Employee Contributions
  • The lesser of $11,500 or 100 percent of earned income.
Catch-Up Contributions
  • Up to $2,500 for participants age 50 or older.
Employer Contributions
  • Mandatory: 100 percent match on the first 3 percent of compensation deferred. The 3 percent match may be reduced as low as 1 percent in two years out of a five-year period.
    OR
  • Non-elective: flat 2 percent of each eligible employee’s compensation.
Annual Custodial Fee $18

SIMPLE IRA Benefits

Employer Benefits

  • Attract and retain quality employees.
  • Improved employee morale, productivity and employer/employee relations.

Employee Benefits

  • Employer contributions and employee salary deferrals are not taxed until withdrawn.
  • Earnings on plan assets are not taxed until withdrawn.

What is a Simplified Employee Pension Plan (SEP IRA)?
The SEP IRA is an alternative to more complex employer-sponsored retirement plans. It is designed for employers who want to establish and contribute to a retirement plan for employees. It is commonly used by self-employed individuals or employers who don't offer other qualified plans.

SEP IRA At A Glance

Who May Establish
  • All business types.
  • For-profit and not-for-profit organizations of any size.
Administrator Testing None.
Establishment New plans must be established by the employer’s tax filing due date, plus IRS-approved filing extensions.
Employee Eligibility Requirements
  • 21 years old.
  • Have worked for the employer for at least three of the immediately preceding five years.
  • Have earned at least $550 (indexed for inflation) in compensation.
Excludable Employees Certain union employees or non-resident alien employees.
Employer Contributions
  • Discretionary annually
  • Maximum is 20 percent of adjusted net business income or 25 percent of W-2.
  • Contribution not to exceed $50,000.
Annual Custodial Fee $18

SEP IRA Benefits

Employer Benefits

  • Attract and retain quality employees.
  • Improved employee morale, productivity and employer/employee relations.

Employee Benefits

  • Employer contributions are not taxed until withdrawn.
  • Earnings on plan assets are not taxed until withdrawn.

What is a 401(a) Employer Contribution Plan?
A 401(a) employer contribution plan is a defined-contribution plan that allows the employer to make matching or discretionary contributions to employees.

401(a) Employer Contribution Plan Benefits

  • No annual IRS Form 5500 filing.
  • No annual nondiscrimination testing or reporting.
  • Discretion by the employer as to the type of employee eligible to receive a contribution.
  • Discretion by the employer as to the amount and payment schedule of the employer contribution.

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