Retirement plans critical for nonprofits.
By John Quinterno
[04.13.04] — Helping to establish an employee retirement plan was the most significant accomplishment of my tenure as the administrative director of The HOPE Program, a job-training program in Brooklyn, N.Y.
At the time, HOPE employed 10 people, most of whom were long-time employees. Financial limitations, however, prevented HOPE from paying its employees what they were worth.
While substantial raises were not an option, HOPE’s executive director asked me to evaluate the agency’s benefits package to see if it could be modified to better reward employees.
A major flaw with HOPE’s benefits, in my opinion, was the lack of a retirement plan. Because I found this unacceptable, I began to investigate different possibilities.
I initially was overwhelmed by the amount of information and number of options – defined benefit or defined contribution; 401(k) or 403(b) or SIMPLE IRA; matching contribution or non-matching contribution.
Yet I eventually realized that the process was not as complicated as it first appeared, provided that we at HOPE took the time to define carefully our goals and budget.
At HOPE we had three objectives.
First, we wanted to give employees an opportunity to defer money from their salaries and invest in a variety of low-cost mutual funds.
Second, we desired a plan that would not require extensive administrative time or cost.
Third, we needed a plan that would permit the organization to make matching contributions in good years but reduce the match during periods of austerity.
Eventually, HOPE instituted a SIMPLE IRA plan administered by T. Rowe Price, the mutual fund company.
T. Rowe Price made establishing the plan easy and provided a variety of sound, low-cost mutual funds. Also, the plan proved straightforward and inexpensive to administer.
Three general lessons emerge from my experience in establishing a retirement plan.
First, the hardest and most time-consuming part of the process was the planning stage.
Second, if an organization properly defines its goals, actually establishing and administering a plan is a fairly straightforward task.
Third, a company retirement plan truly can make employees feel valued and rewarded. The enhanced morale alone can justify the time and cost associated with establishing a retirement plan, and enrich the entire organization.
John Quinterno is assistant director of the Program on Southern Politics, Media and Public Life at the University of North Carolina at Chapel Hill.