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OneAmerica

Jun 08

Where tax-exempt plans are focusing in uncertain times

By Sponsor Insight

By Sandy McCarthy, president of Retirement Services, OneAmerica

In the face of these uncertain times, we’ve seen new-found levels of appreciation and respect for the organizations providing vital assistance to our communities and citizens. As you know, hospitals and healthcare systems, social and community-service organizations, and religious institutions have stepped up to provide care, support and relief to those in need. These tax-exempt organizations are the foundations of our communities and have always been a top focus for OneAmerica®.

Though 2020 – with the SECURE Act, the COVID-19 pandemic and the CARES Act – has presented challenges for all plan sponsors, tax-exempt plans have some unique concerns and considerations.
Here are a few things we’re urging tax-exempt employers to keep top-of-mind as they navigate the current environment.

Responding to the SECURE Act: This landmark legislation provides the most significant changes to the retirement industry in more than a decade and makes investing for retirement more accessible to millions of Americans. Though the most dramatic changes are for 401(k) plans, there are also provisions impacting 403(b) plans and participants. From tax credits to distributions and more, it’s important for your plan to work with a company that understands the ins and outs of this legislation.

Benefiting from the CARES Act: Aimed to provide relief in crisis, the CARES Act has a number of provisions that benefit tax-exempt organizations. Depending on each unique situation, organizations may want to take advantage of specific provisions – loan resources, employee retention credits or deferring employer payroll taxes. It’s beneficial to work with a company that understands your challenges and helps you best utilize available relief.

Providing for participants’ needs: These uncertain times are challenging organizations and individuals alike. Ensuring your employees have the resources they need to understand recent legislation, market volatility and financial wellness in general will help support them to make the decisions that best align with their needs. And, employee education should cover more than just financial wellness. We recently introduced materials to focus on employees’ emotional wellbeing – understanding that the two are deeply connected.

Complying with the 403(b) plan restatement requirement: The Internal Revenue Service (IRS) has extended the 403(b) restatement deadline from March 31 to June 30, 2020. By restating plan documents onto an IRS-approved document, the IRS is essentially putting a seal of approval on the plan – providing it the type of protection that 401(k) plans have had for decades. Restatement or transferring the existing plan provisions also gives plans a chance to fix errors proactively, and may be an optimal time to review the plan itself. You can learn more about plan restatement here.

Maximizing plan design: Plan design can be vital to achieving desired outcomes, and it’s necessary to keep a constant pulse on whether the plan is operating as intended. COVID-19 has caused many organizations to reassess elements of their plan, like employer contributions, and make difficult decisions on other issues, like temporarily eliminating matching contributions. Your plan’s service provider should be able to work with you to ensure your plan is designed in a way that meets your goals and aligns with your mission.

Ensuring your service is customized: We believe tax-exempt employers do best to work with a company that understands the nonprofit sector and can offer customized solutions that meet each plan’s unique needs. With a 55-plus-year history of serving tax-exempt plans, the companies of OneAmerica have taken a unique approach to offering guidance in the COVID-19 era. Combining industry research with findings from virtual client focus groups, we created materials for our nonprofit and healthcare clients to outline industry issues and hot topics, as well as action items to consider. It’s important to keep in mind that off-the-shelf, cookie cutter solutions aren’t always best-suited for tax-exempt plans, and these employers should ensure they’re getting the customized support that meets their needs.

Connecting with a financial professional: When compared to the for-profit market, many tax-exempt organizations are underserved in this area – with approximately 46% of plans not connected with a financial professional. Now more than ever, these plans may wish to work with a trusted professional who can help them understand and react to changing conditions and legislation.

In these truly unprecedented times, we’re seeing more reliance than ever on the hospitals and nonprofit organizations that exist to care for and support those in need. As the foundation of our communities, tax-exempt organizations continue to be essential. These vital organizations deserve the support and assistance they need to thrive.

As president of Retirement Services, Sandy McCarthy leads the OneAmerica® team offering defined contribution and defined benefits services with a strong focus on customized retirement plans through highly personalized administration and recordkeeping services. She brings more than 30 years of industry experience, including key leadership roles at Mercer, ING (now Voya), and CitiStreet.

Previously she spent seven years in leadership roles as a senior partner at Mercer, where she served as North America Region Benefits Administration Business Leader, following a position as CEO and board member Asia Pacific Outsourcing Business living in Melbourne, Australia.

McCarthy graduated with honors from Tufts University, earning both her undergraduate in sociology/education and Master of Arts degree in education, then completing an MBA from the Fuqua School of Business at Duke University.

She currently serves on the boards of the American Red Cross of Indiana (ARC), Junior Achievement of Central Indiana (JACI), Employee Benefit Research Institute (EBRI) and LIMRA LOMA Secure Retirement Institute (SRI).

OneAmerica is the marketing name for the companies of OneAmerica®. Products issued and underwritten by American United Life Insurance Company® (AUL), a OneAmerica company. Administrative and recordkeeping services provided by McCready and Keene, Inc. or OneAmerica Retirement Services LLC, companies of OneAmerica which are not broker/dealers or investment advisors. Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice.

Nov 11

How giving makes you greater

By Sponsor Insight

By Sandy McCarthy, Retirement Services President, OneAmerica

I still remember the first time I read the OneAmerica® annual report. As a 30-plus year veteran of the retirement industry, I’ve seen my share of them. But this one was different, and, in the midst of discussions and interviews during the summer of 2018, its annual report was a major factor in my decision to join the company as president of the retirement services division.

Detailed in those pages were, of course, the financials. But more than that, I saw a company that cared – for its associates, its valued partners, its customers and its community. I believe that it’s this genuine, selfless dedication to caring for others and contributing to the greater good that makes OneAmerica special.

Giving back as a company

OneAmerica takes seriously its role as a corporate citizen. From our involvement with the 500 Festival Mini-Marathon, the Broad Ripple Art Fair and the Indiana Repertory Theatre, to investing in our community through grant programs and charitable giving, we aim to better the local communities where our employees and customers live and work. In 2018 alone, we:

  • Supported more than 80 organizations, by contributing $2.2 million and 5,000 volunteer hours
  • Gave more than $800,000 in support for organizations that provide people in need with emergency help, including hunger relief, emergency shelter and counseling services
  • Provided $50,000 in regional grants to nonprofits across the United States from OneAmerica and our sales and field teams across the country.

Giving back doesn’t end with monetary involvement or sponsorships. Our associates also pledge their time and skills as a team. During our annual Week of Caring, a weeklong “pay it forward” event started in 2014 by our Chairman, President and CEO Scott Davison, our associates devote time to volunteering for various causes. This September, approximately 1,100 associates took part, providing a collective 3,200 hours of compassion and companionship as they volunteered with nearly 30 nonprofit organizations throughout the country.

Individual associate contributions

No matter the corporate culture, an organization cannot truly give back without the support of its associates. At OneAmerica, I believe we have some of the best. Their passion and dedication to their local communities, through the United Way, the Red Cross, Dress for Success, Junior Achievement and more, is inspiring and makes me proud to work with such a selfless group.

I recently heard about one of our marketing associates, who spends Tuesday mornings helping Gleaners Food Bank deliver items to a neighborhood food pantry at 42nd Street and Boulevard. In addition to this physical labor, he is also devoting his time to help the food pantry start and maintain its first Facebook page.

Just as it is for so many of our associates, community involvement is personal for me as well. I sit on the board of the local chapter of the American Red Cross, and before coming to Indianapolis I served on the board of trustees for the Children’s Center for Communication/Beverly School for the Deaf (Massachusetts) and as a mentor for the Entrepreneurship for All program.

Serving the tax-exempt market

The OneAmerica commitment to caring also extends into the way we do business. One of our major focuses is the tax-exempt market. Not only do we understand the unique challenges for these plans, we are proud to serve these organizations which are so important for our communities.

At OneAmerica, tax-exempt business is in our DNA. Our work in this sector began in the mid 1960s, and many of our longest tenured clients are nonprofit organizations. Our seasoned team is experienced in serving tax-code neutral plans and delivering personalized solutions that allow these mission-oriented, client-focused organizations to help their participants on their paths to retirement.

The spirit of caring for others and giving back is essential to the OneAmerica culture and is brought to life each day through our associates – both at work and in their personal lives. I’m grateful and proud to work for a company that reflects my values and strives to improve the lives of our customers, participants and neighbors – and for the chance to see that caring spirit, described in the annual report, alive and flourishing at OneAmerica each day.  

OneAmerica is the marketing name for the companies of OneAmerica. Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice.

As president of the retirement services division, Sandy McCarthy leads the OneAmerica® team offering defined contribution and defined benefits services with a strong focus on customized retirement plans through highly personalized administration and recordkeeping services. She brings more than 30 years of industry experience, including executive leadership roles at Mercer, ING (now Voya), CitiStreet and most recently, her own consulting firm SDM Strategic Solutions.

McCarthy graduated with honors from Tufts University, earning both her undergraduate in sociology/education and Master of Arts degree in education, then completing an MBA from the Fuqua School of Business at Duke University. She served on the board of directors of the American Benefits Council, Spark Institute, Boys and Girls Club of Middlesex County Massachusetts and the Children’s Center for Communication Beverly School for the Deaf. She was also a founding member of the Superannuation Industry Leadership Group in Australia. She currently serves on the board of the Greater Indianapolis chapter of the American Red Cross and the Employee Benefits Research Institute, based in Washington, D.C., and is a mentor for the Entrepreneurship for All (EforAll) program. 

Mar 18

Don’t leave the employer out of the retirement plan equation

By Sponsor Insight

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

It’s well documented that Americans aren’t saving enough to fund their retirement. So the drumbeat in the industry has been to remind participants in employer-sponsored retirement plans of the importance to “defer, defer, defer” and set aside a portion of their take-home pay.

Meanwhile, companies that administer 401(k) and 403(b) plans have endeavored to provide clients with relatable uncomplicated guidance, make enrolling and plan access simple, and provide resources to keep everything on track. For example, some plans are designed for automatic investment in a target date fund so that some employee participants don’t have to lift a finger.

Broadly speaking, this evolution to making things easy has been borne out by studies in behavioral finance that have shown that these plan designs work.

While we all agree that saving for retirement is a good thing, there’s a financial commitment from the employer that should be acknowledged and also applauded. The retirement plan industry is focused on helping the participant put aside enough money; but just as important, is a focus on assisting the employers in creating the best structure for the organization’s financial goals.

No employer wants to experience hardship when it’s trying to do right by its employees in funding retirement contributions.  But some cookie-cutter approaches, which may seem easy in design and implementation, may not take into account the diverse needs of differently paid staff or worse yet, create cash flow issues that endanger the organizational mission.

The value in saving for retirement

The National Institute on Retirement Security[1] (NIRS) warned recently that American workers fortunate enough to have a retirement account offered through their employer still face a deep retirement savings shortfall.

Ultimately, the inability of older Americans to be self-sufficient after a lifetime of work will have negative impacts on the U.S. economy, government budgets and families, according to NIRS.

How retirement plans work

Contributions made by an employer to an employee’s retirement plan ─ whether the plan provides for elective deferrals or not – is regulated by the Internal Revenue Service (IRS),[2] and it’s those complex IRS rules that outline the guardrails for a tax-exempt retirement plan. (If you work for a nonprofit, that’s a common savings approach at your organization.)

The IRS allows an employee to defer his or her pay and allows the employer to also then make a tax-deferred contribution. The plans have strict rules in order to maintain their tax-deferred status. (The Employee Retirement Income Security Act requires several tests each year to prove a plan does not discriminate in favor of employees with higher incomes.[3] These rules don’t apply to government plans.)

While it’s not given, over time these contributions accumulate through the act of continuous employee/employer contributions and compounding.

A match, where the employer contributes an identical amount to what the participant invests, is not mandatory, but is the most common type of contribution.

I would argue that there are also other ways for employers to make contributions for the benefit of the entire company.

Here’s what could make a difference and is worth consideration:

  • Look at the usefulness of creating three separate retirement plan pools — one that matches automatically for everyone who opts into in the retirement plan, one that is reserved for specific groups of employees with high-demand jobs, and a third that’s targeted to profit-sharing based on performance.[4]
  • Consider a formula that factors in the Social Security Replacement Ratio. Not many people realize Social Security’s payout structure provides benefits progressively, so that people who earned the lowest wages at a company upon retirement receive a higher replacement rate than did the higher earners. As a result of this Social Security policy, the law allows employers to make contributions to offset the Social Security deficit for middle and higher income workers – compensating them for what Social Security is not going to pay out when they are eligible to draw it, in other words.
  • Consider unique retirement plans at companies or organizations with specialty occupations, such as the medical field, acknowledging that the retirement-saving needs of “late entrants” into the workforce (attorneys, physicians, accountants and other professionals of occupations that require years of schooling) are different than other members of staff. Adults who left their careers to raise their children missed out, so they could be eligible for unique retirement plan designs that helps them catch up.

Employers may also look at the possibility of contributing more to the retirement account during a great year for the organization’s bottom line, but also possibly contribute less in a down business year.

Ultimately, the retirement plan of any tax-exempt organization needs to mirror their mission. The plan should be of optimal plan design and be one where the employer isn’t painted into a corner by funding obligations.

We’ve found through our experience that there are all kind of things we can do that makes sense. But ultimately, if the system in place is not good for the employer, it won’t be good in the long term for their employees.

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. Since joining OneAmerica in 1988, Kevin has held various positions within the Retirement Services division. Beginning in 2000, his exclusive focus has been on healthcare and tax exempt organizations.

Indianapolis-based OneAmerica®, an organization that can trace its roots back to 1877, has been helping organizations with their tax-exempt retirement plans since 1964. We believe a retirement plan should do more than help someone retire – it can help organizations recruit, retain and reward employees.

What can we answer for you?

OneAmerica® is the marketing name for the companies of OneAmerica. Products issued and underwritten by American United Life Insurance Company® (AUL), a OneAmerica company. Administrative and recordkeeping services provided by McCready and Keene, Inc. or OneAmerica Retirement Services LLC, companies of OneAmerica which are not broker/dealers or investment advisors.

The views and opinions expressed in this material are solely those of the author and do not necessarily reflect the views and opinions of any of the companies of OneAmerica. Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Investing involves risk including potential loss of principal.

[1] https://www.businesswire.com/news/home/20190206005338/en/National-Institute-Retirement-Security-Testifies-House-Ways

[2] https://www.irs.gov/government-entities/federal-state-local-governments/employer-pick-up-contributions-to-benefit-plans

[3] https://www.plansponsor.com/401k-nondiscrimination-tests-explained/

[4] https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-vesting