The number seven is usually considered lucky. However, it seems there are a lot of lists of seven things that are negative. Whether its seven deadly sins or the seven words you cant say on television, there doesnt seem to be a lot of lists showing seven positive things. I will therefore take it upon myself to list seven positive questions that should be asked of non-profit retirement plan sponsors:
1) Does your organizations management and board feel confident with the plans governance and their own responsibilities as plan fiduciaries? Too often in a non-profit organization, the management and board are not even aware they are fiduciaries.
2) Who is helping you with your fiduciary due diligence? A typical non-profit is focused on its mission and is usually not an expert on fiduciary duties related to its retirement plan. In fact, some organizations believe their provider is handling that. Non-profit organizations are in need of help from qualified financial professionals.
3) Do you have an investment policy statement and review process in place? This is part of prudent governance and a fiduciary best practice. Its also surprising how many organizations dont have investment policies in place.
4) Do you have an education policy in place? Too often, non-profit organizations simply rely on vendor representatives selling product in the cafeteria. There is no consistency of messages, or direction, from the plan sponsor.
5) What challenges has your organization faced as a result of plan regulatory changes? The answers could range from administrative challenges in coordinating information from multiple providers to problems with Form 5500 and the annual audit.
6) If your plan uses multiple providers, or has legacy plan assets with multiple providers, how do you coordinate appropriate administration? Challenges here range from common problems with loans and hardship distributions to lesser-known complications with QDROs, small amount force-outs and beneficiary designations.
7) How are you measuring the success of your plan? How are you ensuring that your plan is effectively getting your employees to save for retirement? A retirement plan should be making employees retirement ready. Does the plan sponsor even know if the plan is effective in doing so?
The answers to these questions can help determine where a particular non-profit organization needs the most help with its retirement plan. Financial professionals are well positioned to help sort through the complexity. Otherwise we could be seeing non-profits drowning in the seven seas, when we should be helping them get to seventh heaven.
Friedman is the tax-exempt national practice leader with the Principal Financial Group, an investment management and retirement leader. A noted expert on 403(b) plan design, he has been consulting with tax-exempt organizations for over 20 years and has been in the retirement plan business since 1986. A version of this blog originally ran on The Principal blog. Follow Aaron on Twitter @1AaronFriedman1.
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