DOL Issues Guidance to Help Faith-Based Employers Navigate Retirement Plan Choices

Small, faith-based organizations considering how to provide retirement benefits for their employees received on April 2 new federal guidance aimed at simplifying a complex decisionmaking process, as the Department of Labor outlined key questions and plan options tailored to religious employers.

The DOL urged small, faith-based organizations to take a strategic and informed approach when selecting retirement plans, emphasizing that such decisions can have a significant impact on employees’ long-term financial security, as well as organizational responsibilities.

In a recent blog post and accompanying guidance, the department’s Employee Benefits Security Administration and its Center for Faith (established by executive order in 2025) outlined five central questions employers should consider, ranging from employee eligibility and contribution structures to legal obligations and administrative capacity.

“Small, faith-based organizations play an important role not only in their communities, but also in the lives of their employees,” the agency noted, highlighting the opportunity for these employers to offer meaningful retirement benefits that support financial futures.

At its core, the guidance is a recognition that faith-based employers often face unique considerations not encountered by secular organizations. These include eligibility for specialized arrangements such as “church plans,” whether defined benefit or defined contribution, which can be exempt from certain federal requirements under the Employee Retirement Income Security Act.

However, that flexibility comes with trade-offs. While non-ERISA church plans may have reduced regulatory burdens, they generally offer fewer legal protections for employees than ERISA-covered plans, which require more oversight and reporting.

The department’s report expanded on these distinctions, advising employers to identify a type of plan to offer depending on their tax-exempt status and other organizational specifics.

The guidance outlined a range of retirement plan types available to faith-based employers, including those based on individual retirement accounts, 401(k) plans, 403(b) plans commonly used by nonprofits, pooled employer plans and traditional defined benefit pensions. Each option carries different levels of cost, administrative complexity and employer responsibility.

For example, IRA-based plans such as SIMPLE IRAs are described as lower-cost and easier to administer, while defined benefit plans can provide predictable retirement income but require higher funding commitments and actuarial oversight.

The DOL also stressed the importance of an employer evaluating the administrative capacity of its organization before selecting a plan type. Employers sponsoring ERISA plans must file annual Form 5500 reports and comply with fiduciary standards, while non-ERISA plans may still involve IRS requirements and other paperwork. The paperwork might not be optimal for smaller organizations due to the potential cost and complexity.

In addition, officials recommended that organizations seek professional advice and consult benefits advisers, particularly regarding tax rules, plan design and evolving legal requirements.

Ultimately, the agency framed retirement planning as both a compliance issue and a mission-driven opportunity. Offering a well-designed plan, the report noted, can demonstrate an employer’s commitment to employees’ well-being while also helping organizations attract and retain staff.

While it is unclear what percentage of church-based organizations offer retirement plans, smaller employers generally are less likely to offer retirement savings plans. A 2023 Boston College study, for example, found that more than half of small employers did not offer a workplace retirement plan. According to a 2023 Government Accountability Office analysis of 2019 IRS data, nearly 33,000 church employers reported plan contributions from 589,000 participants.