Updating a Program to Help Nonprofit Organizers Save

JOB MARKET

Roberto Martinez is still in his 20s, but he has already got $8,000 in his retirement account — even

though he has dedicated himself to a field that traditionally offers few perks beyond job satisfaction.

“I’m not even 30 yet so it’s great to have that money,” says Mr. Martinez, who racked up those savings while working as operations director of the Sage Council, in Albuquerque, which engages in community organizing for American Indians and other members of minority groups.

It might seem unusual that the Sage Council, which has just three employees, even offers its workers 401(k) plans, accounts which enable workers to save money for retirement and defer paying taxes on their contributions until they are withdrawn. The council, however, is offering the benefit thanks to Mr. Martinez’s new employer, an organization in Washington that is helping grass-roots nonprofit groups across the country provide retirement plans to their employees. (Mr. Martinez has been able to roll his retirement account over to his new workplace.)

In 1997, the National Organizers Alliance, an umbrella organization for social-justice advocates, started an ambitious 401(k) program for its employees and those of the groups it serves. The organization felt the need was great because idealistic organizers often work long hours for low pay and few benefits. What’s more, those groups were rapidly losing older workers, who were leaving to earn retirement savings and other benefits elsewhere. (For more on the alliance’s program, see “A Safety Net for Aging Activists,” The Chronicle, February 11, 1999.)

Since then, the expansion of the alliance’s retirement plan has required ditching the old 401(k) provider and finding a financial firm that could accommodate its growth.

Today the coalition’s 401(k) plan contains roughly $10-million in assets and manages upwards of 1,000 accounts. More than 120 nonprofit employers offer the plan to workers, who are spread across the United States. The participating groups range from those staffed by two or three people to offices employing 20. And the grant makers that helped the program begin and grow say they are pleased with the results of their support.

A Change in Providers

The alliance tried to make the plan affordable to encourage cash-strapped nonprofit organizations to join. The start-up fee for employers is $400, and their yearly administrative fee is also $400, which includes the annual cost for the first two employees enrolled in the program. For all additional workers, the charity pays $27 a head.

The alliance doesn’t want the initial expense to deter any motivated charity from enrolling.

“We sometimes subsidize the start-up costs if that is the difference in getting in,” says Cathy Howell, the alliance’s deputy director. What the program does require from employers is a commitment to contribute at least 5 percent of their employees’ salaries into their 401(k) plans each year. And they must make the contributions even if their workers don’t contribute themselves. For the Sage Council, for instance, that has meant designating $8,500 out of an annual budget of $300,000 for the council employees’ retirement plans.

Kelley Weigel, field director of the Western States Center, in Portland, Ore., a regional training and consulting organization for nonprofit groups, says she appreciates the mandatory employer contribution. “I’m not the best saver in the world, but that is the whole point of the plan,” says Ms. Weigel, who notes that the program is easy to administer. “Participation is essentially 100 percent; everyone will get something.”

The burgeoning retirement plan has presented its own set of challenges. As the program grew, MetLife, the original 401(k) provider, wasn’t as flexible as the alliance would have liked, says Kat Rohr, the alliance’s retirement director. The company, she says, insisted that one of its representatives had to meet personally with every person who enrolled in the plan, even if he or she lived hundreds of miles away. The alliance also considered the penalty fees that MetLife imposed on accounts when investors withdrew the money prematurely to be too high and “a really bad trap,” says Ms. Rohr.

When the National Organizers Alliance outgrew MetLife’s investment lineup, the organization froze the plan to new employees for a year beginning in October 2004. The alliance ultimately selected a new provider, Lincoln Financial Group, which offered plan participants more investment choices and even paid the $700,000 in penalty charges that were triggered when the coalition moved the accounts. “Lincoln Financial reimbursed every penny,” Ms. Rohr recalls. “We were really, really excited about that.”

Grant Makers Pleased

Foundations that provided infusions of cash to the National Organizers Alliance to allow it to offer the retirement benefits remain enthusiastic supporters.

“It’s been a very good thing for a lot of social-justice workers, who wouldn’t have access to retirement plans otherwise,” says Lee Winkelman, program officer of the Veatch Program of the Unitarian Universalist Congregation at Shelter Rock, in Manhasset, N.Y., which supports groups that foster the growth of the religious denomination. Veatch has given the alliance a total of $584,000 over a 12-year period for the pension and other programs.

Victor De Luca, president of the Jessie Smith Noyes Foundation, in New York, which has donated $287,500, was equally pleased with the program’s evolution. “It was slow going in the beginning,” Mr. De Luca acknowledges. “It was hard to convince organizers, many of them younger, to even think about a pension.”

The growing pains, however, were worth it, he says: “It has been very important for the organization to help organizers as they get older to stay in the field, and that was the intent — to provide organizers with stability as they age in place.” — Lynn O’Shaughnessy