How to encourage 403(b) enrollment through plan design

Sponsoring a 403(b) is an excellent way for nonprofit and public organizations to have a positive impact on the communities their employees serve. In fact, ADP Research shows that benefits, like retirement plans, are directly tied to engagement, loyalty, productivity and overall employee experience (ADP Employee Benefits Survey, 2023).

However, offering a 403(b) is merely the first step. Employers must also encourage plan participation. To do that, they must learn how to align their plans with organizational goals, choose features that drive engagement, and create an enrollment process that feels accessible and relevant to employees.

Understanding the basics of 403(b) plans

403(b) plans are designed for employees of public schools, certain nonprofit organizations and some churches who need a simple, tax-advantaged way to save for retirement. Eligible workers may set aside a portion of their salary on a pretax basis, thereby building savings for the future while reducing taxable income today. Many organizations also match contributions.

A 403(b) as just described may sound similar to a 401(k), but there are significant differences. 401(k) plans are typically used in the private sector and often come with more investment options and stricter testing requirements under federal law. In contrast, 403(b) plans have simpler compliance rules, particularly around nondiscrimination testing, which makes them easier to administer for schools and nonprofits.

Key takeaways about 403(b) plans:

• Eligibility: Employees of public schools, tax-exempt nonprofits, and certain religious organizations (including eligible ministers) can typically participate. If a 403(b) plan allows any employee to contribute, most employees must be offered the same opportunity under the IRS’s universal availability rule.
• Contributions: Pretax contributions lower taxable income while savings grow tax-deferred.
• Roth option: Many plans also offer a Roth 403(b), allowing after-tax contributions with tax-free withdrawals in retirement.
• Administration: Compared to 401(k)s, 403(b) plans often have simpler compliance requirements.

403(b) and 401(k) participation rules

Some employees, particularly those working part-time for nonprofit and for-profit employers, may have access to both a 403(b) and a 401(k). Their participation is allowed, but annual IRS contribution limits apply across the combined accounts.

Participation is the start, not the goal

Offering a 403(b) plan doesn’t guarantee high enrollment. To increase participation, employers should consider automatic enrollment, re-enrollment campaigns and better employee communication:

• 403(b) automatic enrollment brings employees into the plan by default. Most remain enrolled once contributions begin.
• Re-enrollment campaigns give those who previously opted out a fresh opportunity to join. Providing more detailed information about the plan and any new features typically helps improve the success of these campaigns.
• Clear communication and education show employees how contributions, matches and tax advantages work, building confidence that leads to higher participation and stronger long-term commitment.

When participation feels like part of the culture, not just optional paperwork, enrollment rises and long-term savings improve.

Benefits of upgrading a 403(b) plan

Outdated 403(b) plans may hold an organization back. These older 403(b) plan designs often rely on limited vendors, obsolete technology, inflexible service and product features that no longer serve employee needs. The result is lower enrollment and more administrative work than necessary.

Modern 403(b) plan features that make a difference

A new approach to 403(b) plan design changes the equation. Employers should consider features like:

• Automatic escalation to gradually increase contributions
• Roth contribution options for greater flexibility
• Integrated payroll solutions that simplify administration

These updates reduce friction, improve participation and align the plan with expectations of employees today. Seventy percent say that strong benefits, such as retirement plans with employer cost-sharing, help them feel more financially prepared (ADP Research, Employee Benefits Survey, 2023).

Choosing the right features for an organization’s 403(b) plan

The features an organization chooses may determine whether employees view the plan as valuable or overlook it entirely. Evaluating which features best serve team members begins with understanding employee needs and organizational goals. For example:

• An employer match may be the strongest motivator for participation.
• Roth deferrals might appeal to younger employees who expect higher income in the future.
• Vesting schedules can reinforce retention.
• Automatic enrollment means more employees get started quickly.

Integration with payroll or HR systems is another variable. When the plan connects directly to existing platforms, contributions are processed on time, errors are reduced, and employees get a smoother experience when managing their accounts.

Helping employees enroll

Strong features work best when employees know how to use them, so clear guidance on how to enroll in a 403(b) plan is a must. Some organizations provide step-by-step instructions during onboarding, while others use digital tools or benefits portals to simplify the process.

Other ways to engage employees in 403(b) plans include:

• Communicating the long-term value of a matching contribution if it is available
• Explaining how Roth and pretax saving options fit different financial goals
• Highlighting milestones in vesting schedules to encourage retention
• Using payroll integration to simplify enrollment and contributions

State-specific 403(b) enrollment considerations

While federal law sets the framework for 403(b) plans, several states have their own retirement savings mandates that employers must keep in mind.

For instance, in California, many public employers are also subject to the CalSavers program, which requires eligible employers to offer a retirement savings option if one is not already in place. Organizations that sponsor a 403(b) plan may qualify for an exemption, but the requirements still need to be reviewed carefully.

Meanwhile, in New York, some school districts offer both 403(b) and 457(b) plans. This dual availability gives employees more flexibility in saving for retirement, but it also adds complexity. Administrators need to communicate clearly how the plans differ so employees can make informed choices.

Other states continue to roll out similar retirement savings initiatives, and rules may shift over time. Even small variations in state mandates can create confusion if they are not addressed early.*

*Always confirm state-specific rules with the Department of Labor or a plan advisor to ensure a 403(b) plan is compliant with both federal and local guidelines.

Explore 401(k) employee enrollment

Next steps for administrators

Retirement plans should evolve with the workforce. To keep a 403(b) plan relevant, administrators should not only focus on compliance and plan design, but also on the employee experience.

Practical next steps include:

• Review current plan design to confirm features meet employee needs
• Benchmark participation and contributions against peer organizations
• Align updates with open enrollment or the fiscal year for smoother rollout
• Integrate payroll, HR and benefits to reduce administrative work and improve the employee experience

For those ready to move forward, ADP creates a 403(b) plan design that incorporates an organization’s mission and team needs. Our retirement solutions also integrate with payroll, simplifying administration, improving participation and creating lasting impact for employees.

Frequently asked questions

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This article is educational. If you are evaluating next steps, ADP Retirement Services’ 403(b) program may fit your needs.

ADP Inc. owns and operates the ADP.com website. Unless otherwise disclosed or agreed to in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products. Please consult with your own advisors for such advice.