5 Reasons Why You Need a Retirement Plan for Your Organization

You need a retirement plan for your organization. Here’s why.

#1: To attract new employees

1. When you have a retirement plan, it lets yours staff know that you care.

2. It lets them know that you want to encourage them in their financial understanding and stewardship responsibility.

3. Those attracted to your mission/ministry are initially attracted by what you do and who you serve. After they dig deeper into what it means to "work for or join your organization," the financial components to the decision surface.

  1. How much will I be paid?

  2. How much do I have to raise?

  3. How is health care handled?

  4. Is there a Retirement plan and can I take it with me if I leave the organization?

It goes further; many churches will not provide financial support to an individual working for a Religious non-profit unless there is an “adequate” plan in place. “Adequate” is interpreted as meaning sufficient so that the person being supported can leave that support when they “retire.”

Research confirms that most workers in religious organizations will not retire from that organization, yet increasing numbers understand that saving for retirement is not a function of the employer only, but an important step they must take now and continue it through the job change process.

More “middle years” employees are retiring from their secular jobs and joining religious nonprofit teams. While they may have started their savings plan earlier, they need to finish it. Having a High Impact retirement plan in place provides the context for that part of their “finishing well” scenario. 


  #2: To retain new employees and staff

Higher salaries, internal pay equity, and group benefits are keys to employee satisfaction and retention.

The supporting and enhancing a well defined and delivered, high impact, retirement plan is one of the signals to an employee that “you care.” You care not only about the “now,” but are concerned for their future as well.

When we examine the retention power of a retirement plan, that power is influenced by a number of factors:

  1. Is the information about the plan clear to the participant?

  2. Is the plan supported by an “engaged” sponsor or, is there never any reference to it?

  3. How the plan is designed? An employer contribution, no matter how small, a matching contribution, and volunteer option for all are keys to enhancing the value and adding retention power.

We are often amazed about how some plan sponsors treat their plan...almost as a necessary activity instead of a key portion of the ministry’s attraction and retention plan/strategy.

Further, if the plan is “transportable” (i.e. the employee can take it with them when they leave), they have the freedom to act, which, interestingly enough, increases the likelihood of their staying. An open palm has greater attraction than a clinched fist. This is the thinking behind our consistent recommendation to not have a “vesting schedule”. A vesting schedule depreciates the value of the plan and seems to encourage earlier departures than one that positively encourages staying. An example is to increase the value of the match after a few years.

Clearly if the employee knows the value to them of the plan, and that the net result will be a Future Funded Ministry Plan in place, the attraction of staying is increased.


 #3: To retain key employees and staff

Here are some key thoughts:

A suggested mission statement for your retirement plan: “Our retirement plan’s mission is to inspire, inform, encourage and enable our staff to plan and implement better today so they can keep making a difference for a lifetime.”

“Impact” - our context here means, “Changed lives”! Can a retirement plan really do that? Change Lives?

The future impact is clear. A Future-Funded Ministry Plan providing the financial freedom to minister when the paycheck stops is a great source of encouragement when you get to that point.

Unfortunately, many of us treat the retirement plan as a necessary program that only impacts the future and has little relevance to the present, except to drain assets that could be used for another purpose. We acknowledge that our act of putting aside resources for the future impacts the future. We are less clear how this act can and does impact the present.

Lives are changed when we stop going in one direction, and turn to face another. The decision to make that change, a conversion if you wish, is critical. When facing financial confusion, debt, arguments with one’s spouse, and questionable money-based decisions, our response is often fear, doubt, anxiety, and or a decision to “duck” and ignore the realities. This faces us in a wrong direction.

If we change to face a different financial direction, lives change. A comfort level and the development of key skills such as understanding what is true today, knowing what is needed for tomorrow, and taking action to address those needs impacts not only tomorrow, but how we act today. Translating needs into plans, learning the language of investing, taking personal responsibility for current and future circumstance, communicating with a spouse or significant other about money matters, deciding on what steps to take, and then following through are all life skills needed today. Interestingly, all these skills can be developed with high impact within one of life's great laboratories, the Ministry Retirement Plan.

You create a high impact retirement plan when the following are in place:

  1. A solid, well communicated plan design

  2. Best of Class Investments guided by an Investment Policy Statement

  3. An Oversight Committee that is focused on communicating and overseeing the plan

  4. The metrics and measurements of participant involvement are regularly reviewed

  5. Easily communicated basics and principles mentioned above are made available and put in front of participants

  6. Ministry leadership models the actions and attitudes necessary to manage a successful plan

A retirement plan is necessary in order to Attract, Retain and Impact your staff. A clear mission statement is certainly a good place to start. Stay tuned as we continue to expand on the topics prompted by a Changing Landscape. We’ll be To the Point.

There are undoubtedly additional reasons why the retirement plan increases retention. If you will share them with me, I will share them with all.


#4: You are responsible. You are a fiduciary.

Here are some key thoughts:

A suggested mission statement for your retirement plan: “Our retirement plan’s mission is to inspire, inform, encourage and enable our staff to plan and implement better today so they can keep making a difference for a lifetime.”

“Inspire, inform, encourage and enable our staff to plan and implement better today… making a difference for a lifetime.” The focus of your plan oversight and implementation responsibility is to view it through the lens of the participant. You are to take all actions and steps with the betterment of the participant in mind.

So, are there any actions that do not have to be viewed through that lens? Yes, there are three:

  1. The decision to set up a plan in the first place

  2. The design of the plan itself

  3. The decision to change the plan

Other than those three, the fiduciary responsibility is in full play. Interestingly, the identification of those who are fiduciaries is based on what they do for the plan. Who has ability to influence and control its administration? Under the expanded "Landscape" of retirement plans, the only truly involved folks who are not fiduciaries are the attorney or CPA functioning in their specific capacities. They are not held to the "fiduciary" standard in light of their professions.

Key Fiduciary Responsibilities:

  • To act solely in the interest of plan participants and beneficiaries, with the single purpose of providing benefits to them.

  • To pay only necessary and reasonable expenses for administering the plan.

  • To perform their duties with the care, skill, prudence and diligence of a person knowledgeable in this field.

  • To minimize the risk of large investment losses by offering a diversified menu of investment options.

  • To adhere to the terms of the documents governing the plan and ensure that these documents comply with all laws.

  • To satisfy all reporting and any testing requirements.

  • To not engage in self-dealing and avoid conflicts of interest.

As a Fiduciary you must understand the key elements of any retirement plan:

  1. The key documents that describe the plan

    1. Legal Plan Document

    2. Summary Plan Description

    3. Plan authorization by the Board of Directors

    4. Investment Policy Statement

  2. The key support systems that must be in place:

    1. The Custodian to hold the funds

    2. The Record-keeper to track the money and report to the plan participants and the plan sponsor

    3. The Third Party Administrator to assist with plan design, compliance, testing and reporting to Governmental entities.

    4. The Investment Advisor to assist with investment selection and participant advice

  3. The IRS is looking for three things:

    1. Are your necessary documents available and up to date

    2. Are you following what the regulations and plan design components say will be done

    3. Are you, engaged in the plan? Engaged means:

      1. Distribute the SPD (Summary Plan Description) annually

      2. Review key documents annually

      3. Review and analyze plan information reports quarterly

      4. Enhance participation and participant connectivity each year

      5. Set up a Plan Oversight Committee

      6. Help organization leaders to stay connected and model plan participation

When all is said and done, here is the bottom line:

  1. You are responsible

  2. Confirm all is in place

  3. Do what’s right (be a Fiduciary)

  4. Make sure everybody knows

The IRS has tightened up and expanded the meaning of fiduciary. It includes doing things right with the expected knowledge of a person knowledgeable in the field. These “to the point” messages are intended to assist you in understanding your role, responsibilities and the support that is available from Envoy. Trusted Advice Along The Way.

A retirement plan is necessary in order to Attract, Retain and Impact your staff. A clear mission statement is certainly a good place to start. You are a Fiduciary! Stay tuned as we continue to expand on the topics prompted by a Changing Landscape. We’ll be To the Point.

There are undoubtedly additional reasons why the retirement plan increases retention. If you will share them with me, I will share them with all.

The fifth installment of “To the Point”, the Landscape has Changed, will be coming soon. Look for it!


#5: You must be engaged and have an internal plan administrator.

 

The New IRS Regulations have brought about one big change: The Plan Sponsor can no longer be a passive provider in the Retirement Plan Process.

In the past, plan sponsors, simply explained the benefit, withheld the money, and then sent the money. Recently, the following were added to the landscape of plan administration: Plan Documents, creating a list of Investments, receiving reports, reviewing investments and occasionally making changes to investments, signing loan and distribution paperwork, and making sure new staff signed up for the plan.

But now, YOU MUST be Engaged!  And that means you need to have a mechanism that allows you to Review, Evaluate and Change your plan as follows:

  • Regularly and consistently “review” all aspects of the plan:

    • Plan Design

    • Investments

    • Investment allocation choices

    • Participation

    • Legal

    • Education and information

    • Evaluate the information looking for anomalies and under utilization or “over utilization”

    • Design an action plan to address the issues

  • Evaluate the plan and take appropriate action. Simply put

    • What is working well

    • What is not

    • How to improve

    • What to change

If you determined that your participation rate among younger employees was particularly low, what would you do to address the issue and increase participation?  Examples of action could include:

  • Have a senior leader talk about the importance of saving for the future at one staff meeting during each of the next quarters

  • Facilitate a webinar with Envoy for younger staff

  • Train each supervisor to review participation with their staff once in the next 6 months

 

Who Will Do This?

The Retirement Plan Oversight Committee led by the Internal Retirement Plan Administrator.  The Internal Retirement Plan Administrator is the person identified in the plan documents as having the Retirement Plan Administrative responsibility and authority to act on behalf of the plan.  This person:

  • Oversees the Plan Oversight Committee

  • Works actively with the TPA and Recordkeeping provider to implement and plan changes

  • Oversees Contribution processing

  • Oversees any required reporting

Envoy Financial is here to support your efforts to provide engaged leadership and oversight to your retirement plan.  We will soon be providing Plan Sponsors with a Plan Oversight Committee Handbook that will provide your Plan Administrator and Plan Oversight Committee members with guidelines, forms, sample agendas, etc. to help them have productive meetings and fulfill their role for the benefit of your organization.

The IRS has tightened up and expanded the meaning of fiduciary.  It includes doing things right with the expected knowledge of a person knowledgeable in the field.  These “to the point” messages are intended to assist you in understanding your role, responsibilities and the support that is available from Envoy. Trusted Advice Along The Way.

A retirement plan is necessary in order to Attract, Retain and Impact your staff.  You are a Fiduciary. The Landscape continues to change, so be Engaged, Organized, and Connected.  Envoy is here to help you Choose Confidently, Invest Boldly, and Manage Easily. Stay tuned as we continue to expand on the topics prompted by a Changing Landscape.  We’ll be To the Point.

The sixth installment of “To the Point”, the Landscape has Changed, will be coming soon. Look for it!