All in Nonprofit Employment

The hidden problems in your nonprofit 403(b)

What is a 403(b) and why does it exist? If you’ve ever asked you were probably told ‘it’s the nonprofit version of a 401(k)’ and that’s true more or less. The 403(b) was indeed created by Congress 1958 specifically for nonprofit organizations. It is the grandparent of the 401(k). 403(b) plans are fine if set up correctly, but there are many bad ones with lousy investments and high fees sold to trusting nonprofits by consultants and brokers that are not fiduciary financial advisors.

Are you paying hidden fees in your nonprofit 401k?

According to Morningstar.com, smaller 401k plans, which includes most nonprofit orgs, are paying double the 401k fees of larger plans. Smaller 401k plans are defined as $25M total plan assets or smaller and make up 27% of the nation's 401k assets. Though fees have come down over time, small 401k plans have total expenses that are more than double the national retail investor average and larger 401k plans. That difference, .47%, doesn't sound like much but it is. In the meantime, how do you find out if your plan is expensive?