3754 / Are tax-exempt and governmental employers eligible to offer 401(k) plans?

Yes. Tax-exempt employers such as 501(c)(3) organizations are eligible to offer 401(k) arrangements.¹ State and local government employers (including political subdivisions and agencies thereof) generally are prohibited from offering 401(k) arrangements to their employees, but certain rural cooperatives may do so.²

1. IRC § 401(k)(4)(B)(i). Of course, 403(b) plans are an option for nongovernmental tax-exempt employers and are also available to governmental tax-exempt employers, like school districts.

2. IRC §§ 401(k)(1), 401(k)(2), 401(k)(4)(B)(ii).