Executive Pastors, Business Managers, Board Members, CEOs, COOs, and HR Directors associated with Non-Profits are often in the dark when it comes to understanding retirement plans.

Often this includes those who are directly responsible for the oversight of their plan or charged with the responsibility of setting up or finding a new vendor.  Occasionally, a man or woman who really knows the business emerges but not very often. The usual dialogue with Non-Profit leadership starts with, “I really do not understand much about retirement plans.”

The 403(b) retirement plan for nonprofits has been around since the 60s with IRAs showing up in the mid 70s and the 401(k) in the early 80s. Prior to the enabling legislation bringing these defined contribution approaches to retirement into the mainstream, Defined Benefit Plans, similar to Social Security, were the norm.

Even today certain pundits lament the passing of Defined Benefit Plans, characterizing them as a better option for employees than the Defined Contribution Plans we have now. They often cite the need for plan participants to actually participate in the plan as one of our societal problems. For example, a couple serving 30 years in the mission field was shocked to discover that their ministry’s retirement plan only provided $13 per month for every year of service. The total $390 per month from their ministry wasn’t going to be enough.

If the same amount had been contributed to a Defined Contribution Plan, with average investment returns, the amount would be more than double. Also, the balance in the account upon the passing of the couple would go to their heirs. Clearly a much better stewardship solution. But it does require the participants to be engaged.

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