As baby boomers are planning to retire in the next five years, nonprofit organizations are readying for the challenges ahead. And two-thirds say they anticipate feeling the effects, according to a new survey from the Plan Sponsor Council of America and Principal Financial Group.
The survey, which includes responses from 403(b) plan sponsors, also reveals that 69% of respondents expect to hire new employees to fill retirees’ old roles, but it won’t be easy as 38% of respondents anticipate facing recruiting difficulties.
“Many nonprofit organizations rely heavily on 403(b) plans – instead of salaries – to compete for the best employees,” says Bob Benish, executive director of PSCA. “We’ve seen 403(b) plans improve dramatically over recent years. It is clear those plans will be increasingly important in the race for high performers, especially in higher educational institutions.”
Over the next five years, 54.4% of respondents say they are preparing to lose 10-20% of their employees to retirement. Among respondents from large organizations with at least 500 employees, 20% anticipate retirement from one-fifth of their employees. This is especially true among higher educational institutions because of the hiring influx in the 1970s and 1980s.
“As a generation of academics nears retirement, financial professionals have another reason to focus on higher education as an opportunity to grow their business,” says Aaron Friedman, national tax-exempt practice leader at The Principal. “Financial professionals who can help enhance plan designs – making plans more successful and, therefore, better appreciated by employees – stand to position themselves well in this burgeoning nonprofit marketplace.”
Besides recruiting, respondents say they are in for other work force challenges as baby boomers retire. In fact, 42.7% of respondents say more training will be necessary, and 39.9% say they are concerned about the upcoming skills gaps. Another 38.1% of respondents anticipate for remaining employees to feel pressure as retirees’ responsibilities are reallocated while 33.5% of respondents see a need for more technology usage.
At 70%, most respondents agree that retirement planning is the responsibility of employees. Still, 66.8% of respondents offer retirement planning education. Large organizations are even more likely to provide retirement planning as 90% of respondents from that segment report doing so.
“403(b) sponsors recognize the need to both encourage employees to accept responsibility to prepare for their own retirement and at the same time help them prepare for the transition,” Benish says. “That is important because while employees generally expect to work into their 60s, studies consistently show many end up retiring before they planned, often due to health reasons.”
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