Saving for retirement is one of the most important actions those in the workforce can take. The security of knowing a stable, monthly income awaits once one is into this new phase of life is worth every penny for one’s peace of mind.
However, according to an initiative supported by Common Wealth - a retirement security company focused on creating alternative retirement plan options for workers who lack access to traditional pension plans - a sizeable chunk of Ontario’s charitable sector workforce, and those working in the sector across Canada, goes about its work without having a proper pension plan in place.
Common Wealth describes itself as an organization that partners with “unions, associations and other membership-based organizations to create and manage retirement plans for workers who don’t have them.”
Which is why it is backing some major national foundations and think tanks in a nascent initiative called the Common Good Retirement Plan; essentially an idea that, according to the website, will “create a national, portable retirement income plan for Canada’s nonprofit and charitable sector.”
Sounds like a good idea. Is it?
The alliance for good benefits
Consensus seems to be “yes.” However, before looking at the “how” of the plan, it’s instructive to look at the “who.” As mentioned above, this proposal is no fly-by-night scheme. The plan has the backing of some heavy sector hitters across the country; an alliance of organizations whose mandates are all about looking out for sector workers and the causes they serve through “decent work” advocacy, not to mention addressing income and wealth inequality issues nationwide.
We’re talking the Maytree Foundation, the Atkinson Foundation, and the Metcalf Foundation, to name just a few. The initiative has also established a steering committee and a group of champions from organizations including Vantage Point, Boys & Girls Clubs of Canada, and United Way Greater Toronto.
So why are all of them so keen on supporting this plan?
The opinion at large is because this plan is a new, creative way of looking at providing retirement security to those outside the traditional pension tent.
“Common Good is specifically designed to meet the retirement saving needs of full-time, part-time and contract/freelance workers of all income levels in the nonprofit sector. [It is] also designed to support nonprofit employers of all sizes who are interested in offering a high-quality retirement program for their employees, especially those who find it challenging to offer such a program on their own. It enables employers to facilitate employee retirement saving and, where resources permit, contribute themselves to their employees’ savings,” according to the plan’s website.
Collette Murphy, executive director of the Atkinson Foundation and chair of the initiative’s “Champions Council”, believes that the plan could have the potential to "raise employment standards in our sector and contribute to a more equitable, inclusive and prosperous Canada."
So how does this work?
According to Common Good, its main idea is to set up a nonprofit entity that would be in charge of overseeing the retirement plan. That entity would be overseen by a board composed of experts in retirement security and investments, and leaders from the nonprofit sector. The board would be responsible for administering the plan in the best interests of plan members, including selecting the investment managers who would manage the plan’s assets.
Common Good would be set up as a hybrid Group Registered Retirement Savings Plan (RRSP) / Group Tax-Free Savings Account (TFSA). Using the TSFAs means that upon retirement, these funds would remain tax-free and, unlike RRSPs or pension plans, would not incur reductions in government benefits such as the Guaranteed Income Supplement (GIS). This component would especially benefit lower- and moderate-income workers in the sector who are likely to receive GIS. The plan would also include a Group RRSP component for workers who earn more and can afford to contribute more.
“Common Good will offer advantages to nonprofit workers of all income levels, but its most significant impact will be in building long-term financial security for workers with incomes under $50,000, and for part-time and contract/freelance workers of all income levels, for whom there are currently few good options available for building retirement security. The plan is structured around a Group TFSA for all members, and Registered Retirement Savings Plan (RRSP) for members with higher incomes,” says Common Good on its website.
Other features of the plan include its portability. Any employee in the plan, if switching jobs and moving to another organization that is part of the plan, can bring the plan with them.
Another selling point is the fee structure. According to Common Good, the investment fees they negotiate on behalf of members “are much lower than market rates for comparable investment products, and a nonprofit governance structure will ensure that the Common Good plan continues to prioritize affordability and benefits for members in all its administrative decisions.”
It is important to note at this point that the Common Good Retirement Plan is not a pension plan per se. Instead of being a defined benefit pension plan, which promises a particular level of retirement income, Common Good would use a “capital accumulation plan” structure, where retirement benefits are determined by a combination of contributions and investment returns. Defined benefit pension plans have fixed contribution rates and locked-in contributions and require an employer-employee relationship. Common Good’s plan would allow employers and workers to set their own contribution rates, provide more flexibility in accessing savings, and be open to freelance and contract workers, as well as employees. Pension plans are provincially regulated, and Common Good would be federally regulated, allowing for greater national portability.
So how does this all jibe with others in the sector pursuing similar supportive plans for the charitable workforce?
ONN the same target
Cathy Taylor, executive director of the Ontario Nonprofit Network (ONN), tells CharityVillage that her organization’s Pensions Task Force – which has been researching and advocating on this exact issue since 2015 - has been in touch with the Common Wealth folks over the last year sharing ideas.
“A benefit of the initiative is that it’s got more people talking about the need for the the nonprofit and charitable sector to have access to retirement benefits. We’re pleased our research and attention to this issue has spurred new initiatives and opportunities for the sector,” she says.
“Because of the sector’s size, diversity, and complexity, there is no one-size-fits-all retirement savings solution. The [Common Good] initiative contributes to the needed pool of supplementary retirement options that, along with high-quality pension plans, will make working in the sector a more attractive option for people; and with happier, healthier, well-supported workers, nonprofits can better meet their missions and deliver their programs and services.”
While not exactly partners in this mission, the ONN is supportive of the Common Good project.
“Those involved with the ONN’s pensions initiative and those involved with the Common Good retirement initiative view their efforts as complementary,” Taylor says. “We have been and will continue to share information and lessons learned from our respective work.” For his part, Bruce MacDonald, president & CEO of Imagine Canada, is staying positive about Common Good.
“We are delighted that vehicles and properties are emerging that support the financial future and well being of the two million [workers] in the sector. And even better, there will be some choice," he says.
His colleague, Brian Emmett, Imagine’s chief economist for Canada’s charitable and nonprofit sector, echoes MacDonald’s sentiment. Though the Common Good plan isn’t yet in place Emmett remains cautiously optimistic.
“We live in a world where the ability to attract skilled and motivated employees is a key issue for all employers. Charities already enjoy an advantage among people who want to make a difference,” he says. “These new measures will allow charities to add a much-needed benefit to attracting and keeping people in a highly competitive labour market."
Buy in or opt-out?
Common Good could be ready for offer in the market some time this year, provided there is critical mass of buy-in from sector workers and organizations alike.
Alex Mazer, founding partner at Common Wealth, tells CharityVillage that since his team began its investigations to gauge interest for the Common Good plan – which hinges partly on a national survey of the sector it recently launched – the company has seen good engagement with the idea of the plan; though he won’t get into specifics.
“Like any pension or retirement plan, Common Good requires a certain minimal scale in order for it to be sustainable and successful. Right now we are defining that scale as 20,000 plan members within the first five years of the plan's existence – or about 1% of the size of the nonprofit and charitable sector workforce across the country,” Mazer says. “Our goal during this sector engagement campaign is to get 50 or more employers to commit to offering Common Good to their employees if it were made available. We are delighted that we have already received commitments from employers and we will have more to say about that soon. We are also looking for unions, associations, or other umbrella groups who would be willing to offer the plan to their members. In late fall, we will, together with the many sector stakeholders involved with this project, assess whether we have achieved that critical mass. The faster the plan can scale, the more it can be improved in terms of its portability, affordability, features, and support for members and employers.”
Asked if the plan conforms to the rules and regulations set out by the Canada Revenue Agency (CRA) with regards to pooled savings plans for retirement, Mazer indicates that there is no issue with running afoul of the Agency.
“The Common Good Retirement Plan does not require any changes to government policy, law, or regulation. It would use existing retirement savings programs – group TFSAs and group RRSPs – that have existed for years and that the CRA is very familiar with. We continue to work with a variety of governmental stakeholders to ensure they are aware of the initiative – and we are pleased that the response so far has been very supportive – but the plan can be created within the rules as they exist today,” he says.
A New Year’s retirement resolution?
Time will tell whether Common Good will successfully roll out in 2019, as hoped. However, a recently released consultation paper and subsequent e-bulletin from Common Good indicate that a base minimum of 50 “Committed Employers” will be required before consideration to operationalize the plan. It has now exceeded this goal, with a December 2018 progress report indicating they have 65 employers from 12 provinces and territories committed to to offering the plan, if and when it becomes available.
The consultation paper also announces a partnership with Vancity, Canada's largest credit union. It also outlines five next steps that will be explored over the next six months, and states, "We are optimistic that with the right partners, design and engagement model, Common Good could be open to enrolment as early as 2019."
Statements by committed organizations sound a hopeful note. Paul M. Taylor, executive director of FoodShare Toronto, calls the plan “an exciting and much needed flexible offering” that is a “great step” towards helping nonprofit employees “enjoy the retirement that they deserve."
His sentiment is echoed by Chris Rider, executive director, CPAWS Yukon. Rider says Common Good provides his organization the “hope that soon we'll finally be able to offer our staff a retirement savings plan that's not only designed for our industry, but one that lets them feel confident that their investments align with their values.”
Meanwhile, Christina Fowler, executive director of The Learning Exchange, sees the plan as the start of rallying cry for sector workers who may feel undervalued.
“It’s time for a united front from NGOs across this country to stand up and challenge the… belief [of] ‘Oh, you work in non-profit so you make less money and have no security,” with action,” she says. “This movement could be the catalyst and platform to redefine what security looks like for community-based organizations. My belief as a leader is that the future sector [workers] - which we need to stand up for - will not need to advocate for their fair pay, benefits and retirement; that equal compensation will be a given, and we will continue to focus our efforts on benefiting our communities."
Out and about for the Common Good
As the Common Good team continues to work on an implementation plan, the last word goes to Alison Brewin, executive director of Vantage Point in Vancouver. Brewin is also a member of the plan’s Champion’s Council and wrote the following testimonial on the plan’s website:
“Those who work for our sector commit to their communities, their art, their environment. While the organizations that employ them seek financial sustainability, the pressure to keep ‘administrative’ costs low is profound. Often this effort means limiting benefits others take for granted; investment in retirement plans is one area employers in the sector struggle to realize for their teams. The Common Good Retirement Initiative gives us an opportunity to offer sector employees yet another reason to stay in the sector, doing good work for good reasons. It is an important initiative that will benefit communities across the country."
Andy Levy-Ajzenkopf is a professional writer living in Toronto. He can be reached at firstname.lastname@example.org.
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