HOW ABOUT A PENSION PLAN?

As many of you know, most of the clients of JM Box Consulting Services are not-for-profit agencies and charitable organizations.  Whether clients or not, these organizations exist in every town and city in Canada.  They have been set up to fill a community need, be it for information on a disease or direct treatment of an illness.  Some assist by helping people straighten out their finances, while others exist to promote leadership development.  Many do so with the assistance of government funding (federal, provincial or municipal), while others are funded solely by direct contribution.  No matter what the source of funding, they provide a needed service, one that, if not done by the agency in question would either not be done at all or would  be left for the government (at whatever appropriate level) to look after.  And we know what the service delivery costs would be if done by government!  So at the end of the day, not-for-profit agencies and charitable organizations provided needed services in a cost effective manner.

The words ‘cost effective’ are often the ones that keep each organization’s Executive Director or CEO up at night.  How do you provide the best service possible when it is imperative for organizational survival that expenses, including salaries, are kept as low as possible?  Every ED and CEO knows that once the cost of providing the service reaches a certain level, their funder, particularly if it is a level of government, will look for alternatives.  As a result, not-for-profit and charitable agencies often struggle to keep the best staff, who must either accept a lower rate of compensation for the hard work they do, or take their experience and knowledge to another employer who pays better.

Not-for-profits and charitable organizations do try to do what they can.  Many use benefit plans as a way of attracting staff.  Others make RRSP contributions for their staff.  While it is something, it is often not enough.  So how about some creative thinking?

In some organizations, benefit plans are sponsored by their provincial body, giving each chapter access to a benefit plan at a reasonable cost, based on the volume of utilization across the province.  Let’s consider going one step farther, and on slightly different topic- pension plans.

Maybe it’s because I am getting older, but I have spent a lot of time recently contemplating pension plans.  I am fortunate, because while I am currently self-employed, I have worked for municipal and health care organizations with solid pension plans.  When I do retire, I will have access to some funding through them.  The best part is that while I worked in several different organizations, the pension plan was portable, so I was able to move it from one to other, accumulating my years of experience.

So why can’t something like a portable pension plan be established for the not-for-profit and charitable sectors?  In Ontario alone there are thousands of employees working in these areas.  What I am envisioning is a pension plan that all workers in the not-for-profit and charitable institutions could participate in.  It would be transferrable between employers in these sectors, so that when an employee does move to another organization (and that, based on the job retention statistics coming out on the various generations, is going to happen no matter what), they will be able to continue to accrue retirement entitlement, while staying in the sector.

There are, of course, a lot of problems with the concept.  Let’s deal with some of them.

The first is the cost.  Even organizations currently making RRSP contributions would find the resulting pension contribution costs to be high.  Perhaps this is a cost of doing business that the levels of government (particularly federal and provincial) need to absorb.  If you want effective (in terms of both content and price) service delivery, it would be enhanced by experienced employees.  Less are likely to leave the not-for-profit and charitable sectors if there was some security in staying.

Who would look after the pension plan?  Setting up a plan and then administering it is difficult work.  But it is also an opportunity for current pension plans to grow their funds and increase their membership.  Well established pension plans, such as the Ontario Municipal Employees Retirement System or the Healthcare of Ontario Pension Plan, would seem to have the inside edge on something like this, given their existing clients.

What about the fact that a large number of employees in the not-for-profit and charitable sectors are part-time?  This is nothing new to the pension plans mentioned above, so there are already criteria set.  That does not mean that it could not be amended.

Many will dismiss my ‘rant’ here as pie in the sky thinking.  And maybe it is.  I like to think that it is a concept that at least deserves consideration.  In Ontario, there is already discussion underway about a provincial supplement to the Canada Pension Plan, so obviously this whole topic is under review.

What is your opinion on a not-for-profit/charitable institution pension plan?  I would love to hear from you on this – comment below or email john@jmboxconsulting.com .