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March 2020

Mar 30

Feeling more secure about new retirement plan legislation

By Sponsor Insight

By Kevin Kidwell, vice president national tax-exempt sales, OneAmerica®

If you oversee or coordinate your employer-sponsored retirement plan or have a team that’s in charge, you’ve no doubt heard about the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Passed by Congress and signed by the president on December 19, 2019, it’s a major bill that affects all Americans.

Like any complex piece of legislation, the SECURE Act impacts companies like OneAmerica®, who administer employer-sponsored retirement plans and are now carefully studying the implications. For our experienced professionals, evaluating and addressing the SECURE Act provisions with clients and financial professionals has been a labor of love ─ especially for our tax-exempt business, because, as our leadership has long said, “Tax exempt is in our DNA.”

This landmark legislation, five years in the making, provides the most significant changes to the retirement industry in more than a decade. In general, the most dramatic changes are to traditional 401(k) plans. However, because nonprofits and healthcare organizations, schools and government agencies are unique and complex, it’s equally important for those who represent tax exempt plans to make sure they remain compliant.

Our analysis uncovered three main takeaways that should fuel important discussions for nonprofits:

  1. We have time to sort it out. The IRS and U.S. Department of Labor have yet to provide key additional guidance, and until then “good faith compliance” is the requirement.
  2. It’s unlikely that the legislation will require you to overhaul your existing employer-sponsored plan. The SECURE Act provides more opportunities and options – such as potentially combining forces with fellow organizations – that could allow your organization to take advantage of scale.
  3. Most likely, the government isn’t done making what they see as improvements to the retirement plan landscape. (Note: Effective dates may also be impacted by the COVID-19 pandemic.)

The SECURE Act contains nearly 30 provisions designed to increase the availability and use of employer-sponsored retirement plans. They may or may not apply to every participant, company or plan.

Here are some areas the SECURE Act may affect:

Accessibility

  • Increases the automatic enrollment cap to 15% for safe harbor automatic enrollment plans. (A safe harbor is a provision in a law or regulation that affords protection from liability or penalty under specific situations, or if certain conditions are met.)
  • Creates opportunities for long-term (by necessity or choice) part-time workers to participate in 401(k) plans.
  • Contains additional provisions that make offering retirement plans more affordable for small businesses, including tax credits (up to $5,000) and elimination of outdated barriers to joining multiple employer plans (MEPs).

Lifetime income

  • While retirement plan sponsors are currently required to regularly notify participants of the value of their plan (including the balance), employers will need to also provide defined contribution participants with an estimate of the monthly income as if an annuity were purchased (even if no annuity option is available).
  • The act provides for a fiduciary safe harbor for selecting a lifetime income provider (usually an insurance company). While selecting a lifetime income option is a fiduciary responsibility, the act absolves the fiduciary of the liability should the provider’s financial condition deteriorate after selection.
  • If a plan-level decision is made to eliminate the lifetime income option, the plan must allow the participant to take an in-kind direct rollover of the option.

Longevity

  • The act removes the maximum age for traditional IRA contributions.
  • The act increases the age for the start of required mandatory distributions (RMD) from age 70.5 to age 72. Those participants between 70.5 and 72 must begin taking the RMD by April of the year following their voluntary exit from their employer or their termination of employment. (NOTE: Due to recently passed CARES Act related to the COVID-19 pandemic, the requirement for RMDs for those over 70-1/2 has been waived for 2020).

HERE ARE SOME FREQUENTLY ASKED QUESTIONS

Q: Are recordkeepers supposed to contact plan sponsors about optional provisions?
A: No. While the SECURE Act provides for increased access to retirement preparation, many of the provisions are optional. Plan sponsors are encouraged to reach out to their record-keeper to discuss the provisions and determine which may be appropriate for their plan.

Q: If an individual didn’t take the Required Minimum Distribution (=

Q: What are these MEPs (Multiple Employer Plans) and PEPs (Pooled Employer Plans) everyone is talking about?
A: The MEPs were available as an option before the SECURE Act. They are typically appealing to organizations where there was a nexus between otherwise unrelated employers and a “commonality of interest” such as an industry association. These opportunities are primarily steered toward 401(k) and while there are advantages, there are also disadvantages.
The SECURE Act created PEPs – Pooled Employer Plans, but that doesn’t apply for tax exempt or 457 government plans (457 is a type of nonqualified, tax advantaged deferred compensation retirement plan that is available for governmental and certain nongovernmental employers).

Q: What’s the post-death beneficiary rule?
A: This applies to retirement accounts where the participant dies and an heir or loved one is the recipient or beneficiary. The money can’t accrue indefinitely and the inheritor(s) is required to deplete that account by the end of the 10th year after the person’s passing, with exceptions provided for minor children of the deceased, disabled or chronically ill beneficiaries or beneficiaries no more than 10 years younger than the deceased. So, someone who inherits a retirement plan account in 2020 will have to have withdrawn it by 2030, noting the exceptions above.

Q: What about the new in-service distribution changes?
A: Section 457(b) government plans reduced the in-service distribution age to 59.5 from what was previously allowed at age 70.5.

Q: What about the penalties?
A: All retirement plans must file a Form 5500 for every year the plan holds assets. Failing to do that will result in penalties for late filing of IRS Form 5500. These fines increase from $25 a day to $250 a day, and the maximum penalty will rise from $15,000 to $150,000.

As the industry continues to comb through the new legislation and awaits required guidance in areas of the legislation that isn’t clear, OneAmerica continues to:

  • Solicit and analyze additional IRS and DOL guidance.
  • Educate plan sponsors on the SECURE Act and its provisions.
  • Engage and partner with plan sponsors to discuss decisions to be made regarding plan changes, including mandatory and optional provisions.

In Kevin Kidwell’s role as vice president of national tax-exempt sales, he works to provide ideas, knowledge, information – both technical and practical – in an effort to facilitate improved plan and participant outcomes. Kidwell has held various positions within the Retirement Services division since 1988. Beginning in 2000, his exclusive focus has been on healthcare and tax-exempt organizations.

Mar 23

Creating award-winning grant proposals: It takes a village

By Sponsor Insight

By Melanie Priest, senior consultant, Hedges

Like the proverb: “It takes a village to raise a child,” it also takes a village to develop competitive grant proposals. The more resources and team members you include when creating grant proposals, the more you will be able to paint a compelling picture of your organization and the project in which you are seeking funding.

With the increasingly competitive nature of foundation grants, best practices suggest including staff, participants, volunteers, community partners, and funders within your organization’s “village” to develop strong proposals. There are more than a million charitable organizations registered with the Internal Revenue Service in the United States (National Center for Charitable Statistics, 2019). Just like fundraising focused on individual donors, it is a competitive world when trying to secure foundation grants.

Your grant proposal may be developed by the best writer around, however it will fall short without preparation, planning, and input from all perspectives of the organization. It is essential to identify and utilize all contributors that comprise your village to set you up for optimal success.

Before creating the most competitive proposal, it is necessary to build your village by getting to know who the funders are in the area.

Find your funder community

Learning about who provides grants in your community is the first step in the grants process. Researching, identifying prospects, and cultivating relationships are key components needed when getting to know the local, regional, and national funding landscapes.

  • Research: There are various databases available to search for funding prospects. At Hedges, we have found that the Foundation Center’s online directory, https://fconline.foundationcenter.org/, is a robust and comprehensive tool providing information about grant funders through keyword and name searches. The directory is available through a paid subscription or for free at the Indianapolis Public Library’s Central Library.

    Additional free resources to conduct your searches include: the IRS informational tax return (also known as the 990) available on guidestar.org, topical list serves, Google searches, foundation websites and newsletters. Of course, word of mouth is also a valuable resource so asking your board of directors, community partners, volunteers, and staff to keep their eyes and ears open for grant opportunities is good practice.
  • Identifying prospects: Once you have identified potential grantors, you will need to narrow your list to only those that are the best match for your organization. Things to consider when identifying prospects include: the focus or purpose areas in which the funder has an interest; similar grants funded, range of grant awards amounts; geographic requirements. Linkages to executive and volunteer leadership are also important.

    Thorough research to determine a match with each prospect is imperative. Determining the priorities and interest areas of each foundation is important down to the keywords used. Even the difference between a food pantry and a food bank is notable as is the differences in college readiness and college-success programs. Without a strong match, there is less of a likelihood that your proposal will be funded.
  • Cultivating relationships: Similar to relationship building with your individual donors, cultivating relationships with foundation staff and board members is critical. This is particularly true with local foundations. Many foundations in Central Indiana encourage or require an in-person meeting, phone call, or other means of communication to share project ideas before an application can be submitted. When in doubt, take every opportunity to get to know funders whenever possible through invitations to coffee, onsite tours and other programming and fundraising events, and engaging funders through social media and other communications.

    Another way to cultivate funder relationships is through networking. Share names of foundation leadership, with your board, staff, and volunteers to determine if anyone has connections. Our clients are often able to get a foot in the door because of board affiliations. And as the relationship is developing, do not hesitate to seek advice from potential funders about the work your organization does. Through the grants process, they have a pulse on the community and what programs are successful. With further cultivation, these relationships then can lead to deeper involvement and increased financial support for the organization over time.

Now that you have identified grant funders, it is time to develop your proposal. Here are two tips you will want to consider when using your village for the most competitive proposal:

  1. Share your story

Most funders want to understand why there is a need for your project and organization and how your organization measures impact. Use available data to strengthen your grant proposals by illustrating the need and the expected results.

  • Community data sources: There are several online tools that provide demographics and statistics by census tract, neighborhood, city, county, region and state. SAVI is a project of The Indiana University Purdue University (IUPUI) Polis Center and is known as one of the first and largest community data-information systems in the country (www.savi.org, 2020). Additional data sources include the U.S. Census Bureau and Stats Indiana. Scholarly articles and studies on the specific issues that your organization addresses are also available through Google Scholar.
  • Measuring impact: To measure impact it is best to create a logic model. The logic model serves as a roadmap for your program and organization, including what resources you need to implement the program, the activities that will take place, the frequency of the activities and number of participants, and how the activities have impacted participants. A comprehensive overview of logic models is described in the W.K. Kellogg Foundation Logic Model Development Guide.

    Logic models serve as a foundation for strong impact measurement. By clearly defining the program’s short-, medium-, and long-term outcomes and associated activities, standardized evaluation tools can then be researched to ensure proper measurement of key outcomes. The data to be collected and measured can be captured through a variety of methods including surveys, focus groups, one-on-one interviews, intake forms and staff observations. A few years ago, one of our clients went through a process to develop a comprehensive research-based program logic model. As a result of the logic model and data collection, they were able to show program impact and were awarded a grant from a funder who had declined a grant proposal in the past because there wasn’t a way to show program impact.
  1. Prime your program experts

Tap into your organization’s program experts and make them an integral part of your grant proposal process. Their expertise and input will strengthen every component of your grant proposal. Key program experts include program and financial staff, program participants, community partners, and advocates.

  • Program staff: The program staff are working on the front lines and implementing programs and services. As logic models and proposals are developed be sure to include them in planning to ensure that the project created is feasible and realistic. A logic model can also serve as a strong training tool for new staff. And remember that front line staff can share stories and accomplishments that will help you, the grant writer, make an inspiring and compelling case for support.
  • Financial staff: Program and organizational budgets are another way to share your organization’s story, demonstrating how you plan to utilize the requested grant funds, and why a funder’s investment is important for program or project success. If you aren’t already, become good friends with your organization’s Chief Financial Officer, controller, bookkeeper or other staff that are responsible for the finances. Budgets and other financial statements are frequently required as attachments for grant proposals to show fiscal organizational health. Financial staff are the best resource in ensuring that the information shared with a funder is current and accurate.
  • Program participants: Don’t forget about the most important members of the village – the program participants. Those receiving services know their needs best and should have the opportunity to inform how the programs are designed and how impact is measured and described. Their input can be acquired through surveys, focus groups and interviews, which should be administered regularly.
  • Community partners: Funders are well-informed about nonprofit organizations in the community and want to know how you collaborate in ways that maximize your collective impact and avoid duplication of services. Consider community organizations as additional members of your village and be able to clearly articulate how you work together and what makes your organization distinctly unique from similar organizations in your field.

Rest assured that successful grant proposals are meant to be created collaboratively. In other words, it really does take a village. So, make sure to meet up with your village and create winning grant proposals that will bring more grant awards to your organization.

Melanie Priest is passionate about making Indianapolis a great place to live, having strong connections in the community and helping nonprofits share their stories of impact. For more than 20 years, Priest has worked closely with the Central Indiana philanthropic community to provide creative solutions to complex problems. As senior consultant, she has worked at Hedges since 2012 securing hundreds of grants for Indianapolis nonprofit organizations to ensure they are able to advance their missions.

Mar 09

Combatting early childhood education deserts

By Feature, Programming

By Lynn Sygiel, editor, Charitable Advisors

In Indiana, the month of March is filled with basketball, and if that madness doesn’t grab you, then just wait till May when the roar of the crowds turns into the roar of the engines. Hoosiers, like people all over the country, love a bit of competition. But not all of it takes place on the playing field, and not every competition ends up with someone holding a trophy.

That’s not to say there aren’t winners, especially in the world of nonprofits, which have adopted the concept as they attempt to expand their presence and draw attention to their work.

The Chicago-based MacArthur Foundation has an admirable mission: “To support creative people, effective institutions and influential networks and build a more just, verdant and peaceful world.” In order to discover those elements, the foundation launched a $100 million grant competition in 2016. It was looking for a single proposal to solve a critical problem affecting people, places or the planet. Called 100&Change, it was open to organizations working in any field of endeavor anywhere. After reviewing 1,904 proposals, it named its recipient in 2017 — Sesame Workshop and International Rescue Committee.

While competitions in general are not new, what is new is nonprofits turning to these challenges to drive innovation. Increasingly, they are discovering that many of the very best ideas lie outside their organizations.

This is true for Early Learning Indiana (ELI). Not only was its recent statewide Child Care Desert competition designed to spur innovation, but there was another motivation – it was a way to expand early learning seats in Indiana, said President and CEO Maureen Weber.

“As an organization, we are really focused on bringing together sort of a system of stakeholders to create accessible, high-quality early education opportunities. We absolutely know that we cannot do this on our own, not on our own in Central Indiana, and not on our own across the state. We needed a way of bringing others into the fold. We felt as though we were having conversations with the same sets of people,” said Weber, who has been in the role for two years.

The light bulb went on for ELI in 2014, when it changed its mission and name, its leadership team and board wanted to do more to expand access and quality early childhood education across the state. They knew that crucial brain development occurs during those early years and can provide a foundation for success in school and beyond. They also knew that early education could have a positive ripple effect that extends to their families, communities and the economy.

The mission gained steam in that same year, ELI approached Lilly Endowment and was awarded a $20 million grant to launch the Partnerships for Early Learners. The initiative was to increase access and quality of early childhood programming across Indiana. ELI now not only had a goal but the funding to pursue it. The next step was to invite potential partners to the table, discover what needs were out there and attempt to fill them.

Andrew Perrin, ELI’s board chair and PNC’s senior vice president and regional sales executive joined the board in 2014.

“My take was the headwinds to getting early childhood education to where it should be were so big that the status quo clearly wasn’t going to cut it. I welcomed any innovation in the space. So, the idea of having a competition, maybe there are other avenues to do it, but I loved the energy of something fresh,” said Perrin.

“I think what makes ELI uniquely positioned is at our core we are a provider of early childhood education. It gives us a level of expertise, as well as, appreciation for what the challenges are. I think that core helps inform our partnerships and advocacy for expanding both quality and accessibility.”

The Partnership for Early Learners initiative added a new role for ELI. It has received and granted over 55 grants to help other providers in the state build their capacity. Early in the effort, Weber said, providers needed funds to meet either licensing or quality requirements. Funds from the grant also helped 400 early childhood educators earn new degrees or credentials.

“Maybe they were lacking a scald valve on their sink or early learning curriculum. So, that was something we could help them invest in and then they could meet the standards and then they could serve children,” said Weber. “We had to get more creative in how we thought about the work, so that the amounts of the work got bigger as well because there were just bigger gaps to close.”

Lack of access, however, continues to prevent many Hoosier children from receiving the benefits of an enriching early learning experience. In 2018, in tandem with Indiana Business Research Center (IBRC), ELI studied access, capacity and need and found that in Indiana, 45.2 percent of children live in a child care desert. ELI defines child care deserts as places with no more than one child care seat for every three children. This study also helped illustrate and raise visibility.

“I think the research, especially in a fiscally conservative state like Indiana, built a business case for early childhood care and education. Anytime you can measure something, it gives people more assurance that this is an effort worth buying into and joining. So, I think what the desert study did was is say, ‘Hey, look, here is the gap,’” said Perrin.

When ELI launched its Child Care Deserts competition last summer, its goal was to address these critical care shortages around the state. Unlike many competitions, ELI offered webinars to ensure applicants understood the data to better incorporate it into proposals. Weber said ELI also shared with potential awardees what is a high-quality seat and the long-term impact of having those available.

“We started this effort by surveying the national landscape and getting a really good sense of what ‘good looks like,’” said Weber. “We wanted to bring those best practices as food for thought to the communities that were applying, while understanding unique community needs. So, part of our education process was to share some great things we’ve seen done across the country. But we also had to understand the unique needs of each community with whom we were working.”

“We spent a lot of time helping our audience prepare their applications, and so we hosted webinars, we had self-service data opportunities so they could know ‘Here’s what the state of the state in our community looks like,’ and had people on tap to sort of help walk through those questions as they had them,” said Weber. “The award itself had to go to a nonprofit, but we encouraged really diverse partnerships. That’s what we had in most places,” said Weber.

Having funding available and the Child Care Deserts study provided an opportunity to have a conversation with a business audience, too, said Weber.

Purposely, there were two phases to the challenge. The first was a letter of intent. From that pool, ELI narrowed the pool to 19, which gave time for those communities to formulate plans and build local partnerships before submitting final proposals. In January, ELI awarded $1.4 million to 13 organizations that will add nearly 1,000 high-quality seats for child care across the state by the end of the year.

Montgomery County Community Foundation was one of the awardees. Although they have many other partners, the funds had to be awarded to a nonprofit. The IBRC study ranked the county among the 10 lowest for child care seats, with only 2 percent of the county’s children under the age of 5 enrolled in high-quality programs. The $100,000 grant will help two local providers add 80 seats by the end of the year.

But that’s not all the grant competition did. Not only will it increase availability in these 13 communities, it elevated the conversations in the community.

As the Montgomery County Community Foundation’s executive director, Kelly Taylor had seen an uptick for early learning and child care grant requests over the past five years. In fact, the foundation had granted nearly $150,000 to child care nonprofits. She said the child care deserts’ study only confirmed what they were hearing. But the competition coalesced the community’s efforts.

“I think what we saw come out of this competition in our community was it rallied diverse groups to work together. We wanted to represent our community well and increase the number of child care seats and have them be of quality level. It really spurred people to action,” Taylor said.

“We know there is still a lot of work to be done, but we think having that success brought a lot of attention to the value of early learning throughout our whole community. We could not have done it on our own. We were able to talk about that data and about what this $100,000 award will do in our community. That has really captured the attention of people in our community and will help us to again continue to move forward,” said Taylor. “We had this early success and we want to build on this. I think it keeps the momentum moving forward.”

Currently, the community is formalizing its Early Childhood Coalition. As part of this effort, it reached out to seven corporate organizations that have provided financial support for the efforts. Part of the plan is to start a resource fund to help providers with training and credentials. In addition, the community foundation and city came together to understand the issue in their community. They engaged a local consulting company to do a community-wide needs assessment. Through surveys, focus groups and a bus tour of existing child care facilities, they understood what is being offered. They did video conferences with other Indiana coalitions to learn what was working.

“We started in August and finished our strategic plan in January. We were meeting constantly during that time, gathering data, analyzing data and putting together a five-year strategic plan. We have a plan to move forward now and really focus on this issue in our community,” said Taylor.

Weber has seen other changes, too.

“When I started in this role nearly two years ago, we were still having conversations about ‘Why this matters. What’s the value? What’s the importance for economic development?’ I have very few of those conversations any more. It’s much more a conversation about what do we do to address the fundamentals. How can we help?” said Weber.

“What we were trying to do was to really elevate the conversation and get people talking from a variety of different perspectives. I really felt like we did broaden the top of the funnel in the number of people that we are reaching,” she said.

Mar 02

Term limits: Expert advice on practical application

By Sponsor Insight

By Jan Breiner Frazer, managing member, Planningplus, LLC

Planningplus+ LLC partners with our clients to strategically achieve tangible results, meaningful impact, and a dynamic corporate culture for current and future success. Our core competencies include strategic and operational planning, board development and committee alignment, leadership development, and building the HR infrastructure. As a result of 30+ years of experience, we have developed a number of our own and unique approaches to working with clients.

Here is an idea for you to consider: Are board-term limits always a good idea?

Read any books or articles on board governance and the issue of term limits is always addressed. Best practices mix indicate that board members should have 3-year term limits, allow a year or two off the board, and then they can apply for another term. But is that always a good idea?

In our years of consulting with nonprofit boards, we consistently find that the most significant challenge for the organization is (and always has been) money – keeping the bottom line profitable to be able to serve more in need, recruit and retain employees, upgrade old facilities, add technology, etc., etc., etc. While the executive director is typically the chief fundraiser, along with a chief development officer, boards generally have some type of committees to support those efforts, such as resource development, marketing, public relations.

But from a board member’s perspective, knowing you have only signed on for three years how much long-sustaining work can you really get done?

Yet who better to role model active support during campaigns, fundraisers, and other revenue opportunities than board members who have consistently shown passion for and commitment to the organization over time? Those longer-term board members have lived the ups and downs, challenges and frustrations, and have significant institutional knowledge about the organization. Is it in the best interest of the board to require them to step off the board?

There are both pros and cons for term limits. Establishing term limits ensures the organization can periodically bring on new perspectives, new energy, new passions and new ideas. Oftentimes these fledgling board members can be the ones who ask “why” and challenge thinking. You need them.

You can also reduce the “we tried it and it didn’t work” mantras. Perhaps most important, it is an easy out for board members who sporadically attend board meetings, avoid committee assignments, don’t show up and support events or who just got burned out over time.

On the flip side, there are always board members who have made significant contributions to the organization, both in time and money and want to continue serving. During capital campaigns, critical funding initiatives, and/or turnaround times these board members have already shown the passion for the mission and with their institutional knowledge of the agency can make a case for support.

As an example, one of our long-term clients, Big Brothers Big Sisters, demonstrated the benefits of retaining long-term, active board members during its capital campaign for a new building. According to Darcey Palmer-Schultz, CEO, it was many of those board members, their contacts, and their time commitments that had a direct impact on the outcome of the campaign. Palmer-Schultz believes that long-term board membership is one of the most common threads in the nonprofit’s major donor base, and she cannot imagine achieving the same level of success without them.

Many boards designate an “emeritus” status for high-dollar donors who don’t want to have to attend board meetings but want to be connected. This is often found in fairly large boards. Our recommendation, however, goes a step farther – to designate a class of board members who best understand the organization and its history, who have participated in the tough lessons learned, and who can mentor new board members coming on board. They are active members of the board, attend and participate in board and committee meetings, and otherwise fulfill all the duties of a responsible board member. On an annual basis these members can choose to continue to serve on a year-by-year basis, and could constitute one-third or one-half of the board, dependent on the size of the board. When working with boards we often refer to this group as the leadership council.

Traditional board members are those elected for the three-year term. More often than not, they have done a great job but after serving a regular term are ready to step back and simply volunteer and/or financially support the organization. After a year or two off the board, they are welcome to again serve for a three-year term (assuming they fulfilled all the responsibilities of board members).

Whichever way you go, our point is that enforced term limits may not be in your organization’s best interests. Consider balancing long-term passion and institutional knowledge with the influx of new ideas and perspectives when it comes time for this year’s elections.

Utilizing our history in board development, committee structure, and board/CEO relationships, we can help.

Jan Breiner Frazier, managing member of Planning Plus, has been a consulting professional since 1987. She has designed and facilitated strategic, annual, and operational planning sessions for a multitude of organizations, often bringing together diverse philosophies, opinions, and perspectives to help groups collectively meet stated objectives. Often, her planning projects have resulted in assisting with organizational design and process improvement initiatives. Her work with nonprofit boards and associations has ranged from strategic planning, board development and committee structure to identifying organizational competencies. Prior to her consulting work, she was the personnel/marketing director for a multi-state wholesale/retail organization, with additional experience in administrative management in public accounting, law and utility construction. She can be reached at jfrazier@planningplusllc.com.