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Pension costs hurt nonprofits, report says

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Most nonprofits that offer retirement benefits to employees report the plans are under stress, a new report says.

That stress has led nonprofits to reduce retirement benefits, trim employer matches, end the accrual or buildup of future benefits, deny pension coverage to new employees and, “as a last resort,” take resources from program operations, says the report by the Johns Hopkins Listening Post Project.

Particularly hard hit have been nonprofits offering “defined-benefit plans,” or those with a guaranteed benefit, the study says, while nearly 60 percent of nonprofits offering “defined-contribution plans,” or those with investments controlled by the employee and with no guaranteed benefits, also report being under stress.

“Retirement benefits are especially important for nonprofits organizations because they offer a way to help offset the generally lower wages paid to nonprofit workers,” Lester M. Salamon, author of the report and director of the Johns Hopkins Center for Civil Society Studies, says in a statement.

Because the federal Pension Protection Act of 2006 requires defined-benefit plans to have assets in place to cover the full cost of their outstanding benefit obligations, Salamon says, “the recent economic crisis, by decimating the value of pension assets, has provoked a crisis for the thousands of nonprofits that offer such plans.”

Among 412 nonprofits responding to a Listening Post Project survey, 76 percent of those offering defined-benefit plans reported their plans currently were under stress and 43 percent reported severe or very severe stress, while 58 percent of those offering defined-contribution plans reported their plans were under stress.

Sixty-seven percent of all respondents reported offering some time of retirement-benefit plan, a proportion the report says seems to be higher than for comparably-sized for-profit firms.

Fifty-eight percent of all respondents offer a defined-contribution plan and 15 percent offer a defined-benefit plan, with defined-benefit plans more common among larger organizations, suggesting the share of employees at nonprofits offering defined-benefit plans may be greater than 15 percent of all employees at nonprofits responding to the survey.

Sixty-nine percent of nonprofits offering defined-benefit plans and 54 percent of nonprofits offering defined-contribution plans indicated at least half their employees, both full-time and part-time, participate in the plans.

Among nonprofits providing defined-benefit plans, 28 percent reported prohibiting new employees from participating; 22 percent reported ending future benefit accruals for all participating employees; and nine percent had blocked future benefits for some employees.

Among nonprofits providing defined-contribution plans, 14 percent offering an employee match had reduced that match and three percent had eliminated the match.

Among nonprofits with one to nine employees, 58 percent are not able to provide any retirement benefits.

Peter Goldberg, president and CEO of the Alliance for Children and Families and chair of the Listening Post Project steering committee, says in a statement that nonprofits employ the fourth-largest workforce of any industry in the U.S.

“We have to make sure that these workers have the protections they need,” he says, “to continue to make the enormous contributgions they provide to our communities.”

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