Food bank offers employees low-cost loans to stem 403(b) plan leakage

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The Alameda County Community Food Bank in Oakland, Calif., is in a curious predicament. On the one hand, the nonprofit organization is in the beautiful Bay Area surrounded by large, progressive companies like Google and Facebook. On the other hand, it is trying to attract and retain employees for its cause while competing with these larger more well-heeled companies for talent.

That has prompted the organization to get creative with its benefits offerings.

“We’re a pretty paternalistic organization in terms of what we can pay. We can’t compete with Facebook and Google,” which are within 30 miles of the food bank, says Marcy Jacobs, director of human resources for the Alameda County Community Food Bank. “How we are able to compete is overcompensation on the benefits side.”

Anyone who works for the food bank, whether full-time or part-time, is required to participate in the 403(b) retirement plan. There is no company match until after the first year of service and then the match is 5% of whatever an employee puts in.

“We are pretty generous on the 403(b) side. We try really hard. Our budgets have to be approved by a board given that we are a nonprofit. There seems to be more questions [from the board] when you raise salaries but less questions when you raise the benefits,” Jacobs says.

The health benefits are also robust, with the food bank covering 100% of the cost of its employees’ healthcare and 93% for spouses and children.

Jacobs says that at her last job she was paying $450 per month to be in Kaiser. At the food bank, she is paying $75 a month to cover her family of four. The organization also funds 100% of dental coverage for both employees and their dependents.

“We are pretty generous on the 403(b) side. We try really hard. "

“Vision is the only one we don’t make a contribution to,” she says.

The latest benefit that has been very well received by employees is company loans through SimpleFi.

One of the biggest problems Jacobs saw when she first came to work at the food bank in 2014 was that a lot of the organization’s 84 full-time employees were taking loans out from their 403(b) retirement plan. The average loan was less than $1,500, but the cost of borrowing from your retirement plan is high, she says.

The food bank serves and employs a wide demographic of educational and socioeconomic profiles, Jacobs says.

“Some of our staff — as much as we try to pay above a living wage in the most expensive part of the nation where it is expensive to live — they are not banked. They are unbanked and don’t have access to credit.”

"Nobody wants to borrow from retirement [funds]. They are only borrowing because they were rejected by a bank or were out of credit card money."

Many of them were cashing their paychecks at check cashing agencies, which charge high interest.

“For a lot of employer groups, if you have an outstanding loan from your retirement account, you can’t contribute anymore so you are not getting the employer match,” says Adam Potter, president of SimpleFi in Palo Alto, Calif. “They are losing out on the growth they could be having by keeping that money in their account.”

If they don’t repay the loan, they take a 10% penalty for early withdrawal and pay 20% to 30% in state and federal taxes on the money.

“They could have borrowed $2,000, not be able to make the monthly payments and be penalized almost $800 on that. Almost 40%,” he says.

Through SimpleFi, the food bank began offering 0% interest loans to stop people from borrowing from their retirement savings. SimpleFi launched in September 2012.

“We really started based on seeing that the majority of Americans were left out of mainstream finances. As we all know, the poorer you are the more expensive life is. We provide a financial solution to overcome financial hardship,” he says.

“Nobody wants to borrow from retirement. They are only borrowing because they were rejected by a bank or were out of credit card money,” Potter says. In the first year SimpleFi worked with the food bank, 20% of employees borrowed money through the program for things like unexpected car repairs and advance registration fees for their child’s college education. After the program was implemented, no employees were taking out loans from their retirement accounts.

SimpleFi also provides quarterly seminars and one-on-one financial counseling sessions to food bank employees. It has provided five seminars so far dealing with how to handle financial emergencies, pay off student debt, raise their credit score and how to qualify for car and home loans. Another one, chosen by employees, looked at how employees could make use of financial technology to help them better manage their money.

The goal for the first year of the program was to serve about a quarter of the food bank’s employees.

“After a year we were up to 60% participation,” Potter says. “Clearly there was a need with that organization.”

Now in its second year with the food bank, Potter says he is seeing a shift in the types of seminars employees are interested in. This year, people are more interested in home ownership and less interested in emergency preparedness.

“We’ve seen those numbers go down and aspirational finances go up, which is a great indicator for us,” Potter says.

Seminar attendance was 74 people out of 84 employees. Because a lot of the employees don’t have access to computers, the food bank had to reach them via word of mouth and flyers around the building and in every bathroom stall.

As part of the program at SimpleFi, employees have access to their credit scores and can work with SimpleFi’s counselors to come up with a plan to raise their scores so they can have access to real loans through a banking institution.

“His sessions fill up so quickly,” Jacobs says. Potter offers four 45-minute counseling sessions during each visit.

“They are not just helping people at the lower rung of our pay scale but helping people who are parents, understanding student loans,” she says.

"Financial health and well-being is really a big [indicator] of physical well-being."

The food bank also has an employee assistance program that works well with what it is trying to accomplish with SimpleFi.

“We are trying to take care of the total employee in all aspects of their life, not just health. Financial health and well-being is really a big [indicator] of physical well-being. People who are stressed over money have more problems for their health,” Jacobs says.

About 16% of employees take advantage of the EAP. With SimpleFi it is closer to 50% for credit reports and 100% for seminars.

“The return on investment is not even a question. It is a no-brainer for our team to go through it. I get thank yous all the time,” she says.

She adds that her function at the food bank is to serve the people who serve the community.

“At least I’m helping the people who are doing the hard lifting. It makes my job easier: how to make their lives happier and more fulfilling and get them to want to stay. There is a real danger of burnout in social services,” Jacobs says.

“The return on investment is not even a question. It is a no-brainer for our team to go through it."

The Alameda County Community Food Bank is part of the Feeding America umbrella of food banks. It serves 116,000 people in Alameda County every month. That is one out of every five residents in one of the richest regions in the country. Her organization has been so successful with its benefits programs, other food banks in the network have been tapping Jacobs for advice about the different programs she is offering.

“It is generous and we are making it work in California, which is an expensive place to run a business,” she says.

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403(b) 401(k) loans 401(k) Retirement benefits Retirement education Retirement readiness