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Finding your benefits philosophy as a nonprofit organization

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Not-for-profit organizations compete for the same talent as other organizations. Therefore, offering competitive employee benefits is a way to attract talent to the sector, but it also has to be done in a way that is realistic for your organization’s budget and values. You can achieve this by shaping your organization’s benefits philosophy.

What is a benefits philosophy? Simply put, it is the basis of your benefits strategy. Organizations can move to define their philosophy at any time, even if they aren't ready to commit to an actual benefit plan. There are several questions that you can ask to determine your organization's benefits philosophy, which include:

  • Who should pay for coverage?
  • Are the benefits designed to attract or retain staff?
  • Should all employees have the same coverage or should classes be introduced to reflect employees’ seniority, tenure, or other differentiator?

Answering questions like these helps you to formalize, in writing, your organization's approach to an actual benefits plan, creating a mission and values statement, if you will, towards benefits coverage. You can then use this as a guide when you need to make decisions about the specific details of coverage.

Moving from a philosophy to an actual plan

For most companies, creating a benefits plan based on your benefits philosophy might be quite straightforward, especially for those with big budgets. Nonprofit organizations may find the process to be more complex and require a little more creativity. For instance, in the nonprofit sector, shaping your benefits philosophy within a vacuum is not possible. In fact, multiple stakeholders may need to be consulted, including a board of directors and organizations that provide funding.

Creating a benefits plan is also not as easy as simply copying what other organizations are doing, since nonprofits vary greatly in size and budget. In order to determine if your benefits plan is competitive, you may have to research nonprofits that are similar to yours, whether that is in size, location, budget, type of funding, etc. Some nonprofit organizations balance lower salary ranges with rich benefit offerings; others work with very limited budgets and their benefit offerings reflect this limitation. Having a benefits philosophy in place can help your organization determine what is most important for you to offer current and prospective employees, in a way that is consistent with your mission.

Keeping costs down

Sporadic and limited funding can make committing to a benefits program for an extended period difficult. But there are options available to nonprofit organizations to help keep costs down. One such option is to have a pooled benefits plan. Pooling means being able to share risk among a large number of plan participants, which can help protect your organization from unstable rates when it comes time to renew your benefits plan. In a blog post on our website, we shared the number of ways pooling occurs:

  • Pooled benefits: pooling benefits such as life insurance, accidental death & dismemberment, critical illness insurance, travel insurance, and dependent life insurance.
  • Large claim pooling: having a limit on large claims protects your organization from being exposed as an individual company to large claims, which are instead pooled with the other plan participants.
  • EP3 pooling: a new drug pooling program which shares the costs of expensive drugs among 23 participating companies in the Canadian Life and Health Insurance Association (CLHIA) if those drugs have hit a plan for two years or more.
  • Total pooling: offers total shelter from the claims experience, including dental and extended health care claims.

Organizations may wish to consider pricing from a carrier or advisory group that offers association coverage or plans with third-party administrators that pool all of their clients together in order to spread risk and smooth out renewal premiums.

Other ways to contain costs for benefits in the short term include using health care spending accounts, decreasing coinsurance, and introducing/increasing employee cost-sharing.

How a benefits philosophy can lower expenses

Determining your benefits philosophy can help your organization decide whether any of the above options work for you. Once you've settled on your benefits philosophy, look at your current benefits plan, if you have one, to ensure that it matches what you set out with your philosophy. If it doesn’t, your benefits philosophy should be your guide to making changes so that your plan is more consistent with where you want it to be.

Benefits offerings can shift over time; new offerings or “shiny objects” presented along the way can seem insignificant when they’re added to the plan little by little but will add up over time. Refocusing on the organization’s values and matching these offerings to the written philosophy can help determine whether those benefits or perks are aligned with the original intent of the organization.

While it is true that nonprofit organizations often have difficulty putting together benefit plans for their staff, there are options available that can make sense financially while also staying in alignment with your organization’s benefits philosophy. Working through the process of creating your organization's benefits philosophy will help you consider what might be possible for your organization, even on a small scale, and can help keep your costs under control once you are ready to move forward with an actual benefits plan.

Andrea Shandro, BA, MBA, CHS is the Principal and Co-Founder of Vital Partners Inc., a Calgary-based firm that helps businesses, business owners, and independent consultants fulfill their insurance and benefits needs through cost effective and sustainable plans. She can be contacted at ashandro@vitalpartnersinc.com. Vital Partners Inc. has also worked with non-profit organizations to help shape their benefits philosophy and create a benefits plan. To learn more about Vital Partners Inc., please visit www.vitalpartnersinc.com, or follow us on Twitter and LinkedIn.

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