Retirement plan makes Virginia a national leader
The University of Virginia men’s basketball team entered the NCAA tournament as the top team in the country only to have its national championship ambitions dashed in the first round.
A group of private, nonprofit Virginia colleges, on the other hand, have been recognized as first in the nation in a recent collaborative effort, and they are not likely to be dethroned.
The Virginia colleges’ field of endeavor wasn’t basketball, but an employee retirement plan. That’s not an area of education that attracts much visibility, much less cheerleaders and pep bands.
The colleges are members of the Council of Independent Colleges in Virginia. CICV represents 28 private, nonprofit colleges in government relations and helps them collaborate on projects that can streamline their operations.
CICV’s collaborative retirement plan likely will set a precedent for private higher education for years to come. Many small colleges, especially, may follow the association’s lead in an effort to lower costs, diminish administrative burdens and retain faculty. In short, this “Virginia way” may help these colleges stay competitive.
About 10 years ago, CICV developed a self-insured consortium that now provides health insurance at 16 member schools. That accomplishment gave its members the gumption to attack an even more difficult issue, retirement plans.
In recent years, colleges’ oversight responsibilities for their employee retirement plans have been growing nationwide. At the same time, the competition for good students has become increasingly intense, putting pressure on schools to restrain tuition increases. In this situation, adding employees to meet retirement plan regulations can become an administrative burden.
The intent of CICV members was to create a 403(b) Multiple Employer Plan (MEP), a retirement plan offered by a group of colleges instead of each school having its own program.
MEPs are common in the business world, allowing several employers to work together in providing 401(k) defined-contribution retirement plans to their employees. Like a 401(k) plan, a 403(b) plan gets its name from the section of the federal tax code outlining such retirement programs for nonprofit employers.
CICV members soon encountered a roadblock in their MEP effort. “We quickly realized that it had never been done in the nonprofit world,” says Robert Lambeth, CICV’s president.
Thus began the five-plus-year journey that resulted in the unveiling of the association plan in early April.
Lambeth says the committee handling the project took its time, methodically building the plan and interviewing vendors that would handle various aspects of its operation.
CICV did not hide what it was doing. Lambeth discussed the project with other colleges and made reports at national meetings.
The completed MEP began in November, and 14 colleges have signed up to participate. They include Appalachian College of Pharmacy, Averett University, Bridgewater College, Edward Via College of Osteopathic Medicine, Emory & Henry College, Ferrum College, Hollins University, Lynchburg College, Mary Baldwin University, Randolph-Macon College, Shenandoah University, Southern Virginia University, Sweet Briar College and Virginia Wesleyan University.
They are joining the MEP in phases through the middle of next year. The first three colleges to join are Bridgewater, Ferrum and Mary Baldwin. The combined retirement plan will cover more than 9,400 people.
The MEP is the first higher-education plan of its kind, says Pete D’Angio, national director for not-for-profit markets with Pentegra Retirement Services, which is one of the plan’s vendors.
He predicts many similar collaborative plans will spring up around the country in the next five years. CICV “built the playbook,” D’Angio says.
One group of colleges in Wisconsin began its MEP in January. The Wall Street Journal reported in April that MEP was the result of increased fees charged by TIAA, the nation’s largest provider of retirement plans services to nonprofit organizations. (TIAA is a vendor in the Virginia MEP, but its role is largely limited to recordkeeping.)
One of the principal goals of the Virginia MEP is to offer employees a better selection of investment options in addition to more guidance on retirement planning.
Paul Davies, the MEP’s board chair, is vice president of administration and finance at Randolph-Macon College. He says that, by combining assets, the plan was able to negotiate reduced fees for employees while giving them individualized counseling, financial planning and access to professional asset-management services.
“We really see this as a win-win across the board,” he says. “It has accomplished everything we hoped when we set the goals to put this together.”
A win in developing a college retirement plan isn’t as exciting as capturing a basketball championship, but the benefits should last a lot longer than one season.