A first for the nonprofit sector
As nonprofits, we play a vital role in the social and economic development of our communities. With a healthier and better-supported workforce, our organizations can lead by example, and be better positioned to strengthen our communities and our province. A decent retirement plan extends the sector’s commitment to building a culture of decent work.
As part of its vision for a stronger nonprofit sector, ONN recommends the OPTrust Select pension plan. A first for the nonprofit sector, the plan offers a stable and secure path to retirement. Employers act as partners in supporting their staff through joint contributions.
The ONN’s two pensions task forces reviewed the possibilities for a sector-specific plan that is affordable for workers and nonprofits and that minimizes risk, provides adequate benefits, and is easy to administer. The ONN believes that the OPTrust Select Plan is the best option for the sector as a whole.
A sector in need of a pension
Nonprofit employees often work in part-time or contract positions with few, if any, benefits. Women by far comprise the majority of sector employees (at about 80 percent). And there is a significant divide between large and small organizations in the sector (in terms of both staff and budget): more than half of nonprofit employers in Ontario have fewer than five employees, while only three percent employ more than half of all workers in the sector. In an ONN study, only nine percent of organizations said they offered an employee pension plan, while 31 percent offered group or individual registered retirement savings plans. More than half the responding organizations had under 20 employees, while about half had an annual budget of under $1 million. More than 60 percent of employees earned $60,000 or less annually.
The ONN recommendation follows years of work by two pensions task forces that sought the best approach for a the nonprofit sector. They found a sector-wide solution could provide a much more efficient vehicle for retirement income security, offering workers greater benefits and a more secure retirement income for comparable contribution rates – and offering employers a powerful recruitment and retention tool. They determined that a jointly sponsored pension plan was a good vehicle to take advantage of our sector’s scale while keeping the administrative burden low.
Q & A
Nonprofit organizations across Ontario have been asking for greater support in providing retirement benefits for employees. A pension plan lets organizations invest in their employees’ future, fostering a culture of decent work that extends beyond their career in the sector. In an ONN survey, fewer than half the respondents said they provided retirement benefits. And fewer than 10 percent said they offered a pension plan for employees.
A sector-wide pension plan not only pools resources across a wider range of organizations, but also provides greater flexibility for employees who may work in multiple nonprofit workplaces during their careers. The more organizations sign on to a common plan, the easier it is for employees to maintain consistent and steady contributions towards their retirement – matched by their employers.
This plan provides a great entry point into a pension plan for the vast majority of sector employers. It involves a contribution rate that is set, predictable, and affordable to even small employers – and their employees.
A pension plan is retirement plan that usually requires employers and employees to make contributions based on a percentage of an employee’s salary. The money is pooled and invested to provide income for employees after they retire.
Other products, like registered retirement savings plans or tax free savings accounts can also supplement retirement income. In general, however, pensions place less responsibility on individual employees (contributions are often equally shared between employer and employee) and offer reduced risk based on economies of scale.
A defined benefit pension plan aims to provide you with a lifetime retirement income. You can know in advance how much income you will receive after you retire (until death) based on a formula that takes into account how long you have been contributing and how much you earned over the years.
OPTrust Select’s fixed contribution rates are three percent of an employee’s salary, paid by the employee. The employer matches this with an equal contribution. For example, if you earn $40,000 a year, you and your employer will each contribute about $3 a day to your plan. You can read more about OPTrust Select pension income here.
Yes – if that organization has also signed on to OPTrust Select.
OPTrust Select is a jointly sponsored pension plan that includes many participating employers. Unlike some traditional single employer plans, it allocates risk across a broader membership base, and shifts responsibility to fund the benefits from the employer to the trust administering the plan.
In the words of ONN’s Pensions Task Force, “We are satisfied that OPTrust has designed the Select plan to minimize the risks to the point where we believe the sector could participate in the Select plan without unduly jeopardizing employers or employees.”
Yes OPTrust Select is available to non-unionized, unionized and mixed union/nonunion workplaces.
Employers match employees’ contributions of three percent of their salary. Contribution rates are set at three-and-three and are not variable.
The plan is administered by OPTrust.