February 03rd, 2026

The Importance of Competitive 401(k) Plans in Attracting and
Retaining Nonprofit Employees
by Lisa Cardinal, CRC, CEBS – Empower

Nonprofit organizations face unique challenges in attracting and retaining top talent. With budgets often constrained and salaries that may lag the private sector, nonprofits must lean on the strength of their benefits packages to remain competitive. Among these, a robust retirement plan—such as a 401(k)—stands out as one of the most powerful tools for both recruitment and retention.

Retirement Benefits as a Differentiator
According to an Empower study(1) employee engagement is the single greatest factor driving savings behavior. Engaged employees are 2.5 times more likely to capture their full employer match and nearly twice as likely to save above the match threshold. The study also found that clear match formulas outperform complex designs, and that auto-enrollment drives both higher participation and increased savings without discouraging employees.

Additional insights from recent Empower research highlight the broad financial concerns employees face:
• 78% say having a financial plan to guide their decisions ahead makes them happier and less stressed. (2)
• 70% of retirees would advise their younger selves to start saving earlier for retirement and to save more. (3)
• 67% agree that “My employer has a responsibility to provide options to help me reach my financial goals.” (3)

These findings reinforce that employees value financial guidance and meaningful support from their employers—making competitive retirement benefits a key differentiator,
especially for nonprofits.

Impact on Retention
A recent article from PLANSPONSOR(4) highlights that benefits, especially retirement savings options, are a core driver of retention. Many employees report staying with their current employer because of access to competitive benefits, even when salary might be lower
elsewhere.

Financial wellness and retirement readiness play an increasingly significant role in an employee’s decision to stay. As Empower research shows, employees who feel supported in reaching their financial goals are more engaged and more likely to remain with their
employer.

Why It Matters for Nonprofits
For nonprofits, employee turnover is especially costly. Beyond recruitment and onboarding expenses, turnover disrupts program delivery, strains donor and community relationships, and puts added pressure on already limited staff resources. Competitive retirement
benefits—such as employer matches, immediate vesting, and auto-enrollment—signal investment in employees’ long-term well-being and strengthen organizational loyalty.

Practical Steps
• Consider offering a 401(k) Plan benefit for your employees if you do not offer one.
• Consider adopting a clear, competitive employer contribution formula.
• Consider implementing auto-enrollment to increase participation.
• Consider shortened vesting schedules to encourage retention and engagement.
• Provide access to financial wellness tools, which Empower’s research shows boosts savings across income levels.

Conclusion
In the nonprofit sector, where every resource must be maximized, offering a strong retirement benefit is not simply a cost—it is a strategic investment. The evidence is clear: competitive retirement plans help nonprofit employees build financial security, improve retention, reduce turnover costs and reinforce an organization’s reputation as an employer of choice.

Citations
1 Empower, “Empowering America’s Financial Journey 2025TM.”
2 Empower, “Great Decide,” March 2025.
3 Empower, “Time is Money,” 2024.
4 PLANSPONSOR, Benefits Continue as Major Factor in Employee Retention, September 30, 2025.