Most Nonprofit Retirement Benefit Plans Under 'Stress,' Report Finds

November 10, 2009 — Most nonprofit organizations that offer retirement benefits to their employees report that their retirement plans are under stress, a new survey from the Johns Hopkins Listening Post Project finds.

The report, Escalating Pension Benefit Costs — Another Threat to Nonprofit Survival? (13 pages, PDF), found that those organizations offering defined benefit plans — plans that provide a guaranteed benefit to participants — have been hit hard, with 76 percent of respondents indicating that their plans are under stress and 43 percent reporting that they are under severe or very severe stress. Even those organizations offering defined contribution plans — plans with investments controlled by the employee and no guaranteed benefit — have been affected, with 58 percent of respondents reporting that their plans are under stress.

In response, many organizations have been forced to cut retirement benefits, scale back employer matches, end future benefit accruals, and/or deny pension coverage to new employees. As a last resort, some have even diverted resources from program operations into their plans. Indeed, many small organizations have been unable to offer pension benefits at all.

"Retirement benefits are especially important for nonprofit organizations because they offer a way to help offset the generally lower wages paid to nonprofit workers," said Lester M. Salamon, the report's author and director of the Johns Hopkins Center for Civil Society Studies. "But, given the Pension Protection Act of 2006's requirement that defined benefit plans have assets in place to cover the full cost of their outstanding benefit obligations, the recent economic crisis, by decimating the value of pension assets, has provoked a crisis for the thousands of nonprofits that offer such plans."