By Edward “Ed” V. O’Neal, Vice President and Manager, Retirement Plans; and Brett Edwards, Associate Vice President and Senior Planning & Research Associate

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Nonprofit organizations have the same financial and retirement planning needs as other employer groups such as business owners and self-employed individuals. Nonprofits can include:

  • Educational Groups (i.e., local K-12 school districts, private/parochial schools, colleges, etc.)
  • Healthcare Groups (i.e., community hospitals, etc.)
  • Local Governmental Groups (i.e., municipalities, police/fire departments, water districts, etc.)
  • Local Public Charities and Private Foundations
  • Religious Entities (i.e., churches, etc.)

Despite these different classifications, nonprofits share important characteristics of having strong connections to the communities they serve and often prefer to work with local service providers. Some common financial and retirement planning needs for nonprofits can include employer retirement plans, investment management services and employee educational services. Yet, surprisingly only 43.4%* of nonprofit groups work with a financial advisor. Working with a financial advisor could provide valuable guidance and support on these important nonprofit initiatives.

Employer Retirement Plans

As with most employers, nonprofit groups are concerned with creating a secure retirement for their employees (both directors/key management and rank & file employees). Nonprofit groups can provide an array of retirement plan alternatives for employees including the more traditional SEP IRA, SIMPLE Plans and Defined Contribution Plans; but also have the ability to utilize plan designs unique to the nonprofit market, such as 403(b) plans and 457 retirement plans.

403(b) Plans

This is a tax deferred retirement program that allows employees to put apportion of their salary into an employer sponsored plan with the potential for matching contributions. These plans are available to qualified nonprofit groups classified as 501© (3) entities; such as schools, churches and charitable groups. There are several versions of 403(b) plans (ERISA and non-ERISA) that correlate to differing features and requirements.

457 Plans

This is a nonqualified deferred compensation arrangement available to various state and local governmental entities (i.e., municipalities, police/fire departments, water/sewer districts, etc.) and a host of other nonprofit groups under IRC section 501. Like the 403(b) plan, there are several versions of 457 plans that offer differing features and requirements.

Investment Management Services

Many nonprofit organizations are aligned with core values which help define their overall mission. Defining an organization’s investment policy can help the organization better carry out their mission. Investment Policy Statements (IPS) are documents designed to outline general investment objectives. An IPS can provide a guideline for nonprofit organizations to ensure that overall investment strategies are consistent and aligned with the nonprofits’ mission and investment goals. A well–constructed IPS contains guidance on asset allocation, risk tolerance and liquidity requirements. More important, an IPS should be reviewed periodically to ensure it continues to meet evolving organizational needs.

Employee Educational Services

Value–added educational meetings for the employees of nonprofits can provide timely assistance and help the nonprofit with attracting and retaining good employees. Educational topics can range from basic investment strategies and retirement planning to more advanced topics, including education planning and insurance needs.

If you’re a nonprofit and need guidance, Benjamin F. Edwards & Co. can help. Our financial advisors welcome the opportunity to work with you on analyzing your retirement plan needs, reviewing and providing feedback on your investment strategies, and providing value-added educational services to your employees.

*2016 PSCA 403(b) Plan Survey

Benjamin F. Edwards & Co. does not provide legal or tax advice, therefore it is also important to consult with your legal and tax professionals for additional guidance tailored to your specific situation.