Nonprofits consolidate vendor functions.
[Editor’s note: This is the fourth article in a series on retirement plans for nonprofits.]
The Employee Benefit Research Institute offers a 401(k) to which employees can contribute, rather than a 403(b), because the vendor it selected for a separate defined-contribution plan offered a 401(k) but not a 403(b).
“It was easiest to structure a program where we had identical investment options, so we did all of that with one company,”
says Dallas Salisbury, CEO of the Employment Benefit Research Institute, a nonprofit in Washington, D.C.
To save money by having one vendor handle two tasks, Community Foundations of America in Louisville, which employs three people, uses a “turn-key” 401(k) plan offered by its payroll vendor.
“Most nonprofits are small,” says Carla Dearing, CEO. “401(k) record-keeping is actually fairly complex and expensive, so you need to select a provider that has structured its service to serve small companies or small nonprofits.”
While they may rely on retirement-plan vendors to handle administrative and investment tasks, nonprofits should feel obligated to take care of their employees, says Dave Dougherty, director of human resources for Southminster Inc., a continuing-care retirement community in Charlotte, N.C.
“We have a fiduciary responsibility to our employees to make sure we are giving them the best options we can,” he says. “People are going to be paying a lot more attention to their retirement plans, particularly when they’re putting money in them.”
To protect themselves against employee lawsuits, he says, nonprofits should be careful in setting investment policies, and evaluating the performance of retirement-fund investments and their managers.
Because nonprofits may lack investment expertise or may not recognize their fiduciary duties, Dearing says, they should get advice.
“While you do not have a specific liability,” she said, “the stakes are pretty high for the employee. You can take the attitude that ‘it’s not my problem,’ but most people don’t run their companies that way.”
Ultimately, having a good retirement plan is good business, said Jan Masaoka, executive director of CompassPoint, a nonprofit consulting firm in San Francisco and San Jose.
“Boards should really look at retirement plans as important measures to increase executive and employee tenure,” she said, “as well as giving staff a signal that the organization is there to stay and that they value the staff.”
NEXT: Nonprofits urged to pick retirement plans carefully.
Other stories in series: