Pension puzzle: Part 5

Nonprofits urged to pick retirement plans carefully.

[Editor’s note: This is the last of five articles in a series on retirement plans for nonprofits.]

Todd Cohen

Nonprofit officials and retirement-plan experts say nonprofits should do their homework in picking a retirement plan.

“Never feel bad about asking what you think is a dumb question,” says Steve Fulkrod, director of administration for the Maryland Center for Arts and Technology in Baltimore. “The only dumb question you can ask is the one that you don’t ask.”

Nonprofits also should seek advice, and use vendors who provide good service and can keep retirement planning simple, experts say.

Questions nonprofits should consider in deciding which type of retirement plan to select include:

  • Does the employer want to contribute to the plan?
  • If so, should the employer contribute a flat amount or a percentage of employee salaries, or match employee contributions?
  • When should employees become vested in the plan?
  • How complicated are Form 5500 information returns and other reports required to be filed with the IRS and U.S. Department of Labor?
  • Will your plan vendor help prepare those forms?
  • What are the investment choices for employees?
  • How will the plan vendor keep employees up to date about their investments?
  • What are the short-term and long-term investment returns on the funds the vendor offers?
  • How easy is it for the employer and employees to make changes to the plan, such as adding new employees, or shifting investments for individual employees’ funds?
  • How easy is it for employees to borrow from their funds?
  • Can employees who are closer to retirement contribute more to the plan than do other employees?
  • What are the quality and cost to the nonprofit and employees of the underlying investment products for the retirement funds?
  • Does the plan vendor specialize in small employers and also offer  other financial services? 

Other stories in series:

Part 1: Nonprofits face tough choices in selecting retirement plans.

Part 2: Nonprofit weigh retirement-plan options.

Part 3: Nonprofits try to keep retirement plans simple.

Part 4: Nonprofits consolidate vendor functions.

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