Ever since the onset of the financial crisis and the subsequent adjustments individuals, families and governing bodies have had to make as a result, there has appeared in the soil of the country a widening rift. One that polarizes all aformentioned parties: The attitudes and expectations that the private sector has of the non-for-profit sectors and vice-versa.
Political opportunists and advocates for both segments have seized the opportunity to turn one another into scapegoats and ailments of the current weak economic state: The non-for-profit sectors often casting blame on the private sector for their bottom line, short-sighted and often reckless financial outlook and the private sector deriding the not-for-profit sector as lazy, greedy societal sponges; wiping state federal coffers clean with their generous benefits.
The financial services industry, catering to both demographics, must stay above the current fray. Understanding how the two groups are similar and different is paramount to fostering a healthy retirement environment in the country. With the current trajectory for many not-for-profit employees’ retirement planning continuing its shift from defined benefit (DB) to defined contribution plans (DC) — especially if Orrin Hatch’s Secure Annuities for Employee Retirement Act gains traction — the industry will be catering to both fairly equally.
LIMRA Retirement Research recently surveyed employees from both the private sector and the not-for-profit sectors to gauge their current attitudes on retirement, risk tolerance and confidence about a secure retirement. For the purposes of their research, LIMRA broke down the not-for-profit sectors to encompass the following groups: Those who work in education, nonprofits and public sector employees (government and military).
One of the main differences between the two is evident in their tolerance for investment risk. LIMRA’s survey found that one in 10 not-for-profit employees had no tolerance for investment risk while one-third had only a little tolerance. By contrast, private sector employees were more open to investment risk with 9 percent not willing to accept any and 25 percent willing to accept a little.
Both segments were in agreement that they would like their employers to offer more comprehensive information and advice on retirement planning with nearly half of employees from both groups reporting so. Thirty-eight percent of private sector employees and 42 percent of not-for-profit employees stated that they were “not very” or “not at all” knowledgeable about their financial investments and products. This statistic could explain the yearning for their employers to supply them with more information.
Unsurprisingly, 15 percent of private sector employees said that they had access to a defined benefit plan while 24 percent of not-for-profit employees did. Smaller plans (fewer than 100 employees) were least likely to have access. The likelihood rose in tandem with the size of the company.
Interestingly enough, 79 percent of not-for-profit employees participated in a DC plan while 77 percent of private sector employees did. Although 80 percent of private sector employees enjoy the benefit of an employer match, just 70 percent of non-for-profit employees do.
Although the current political rhetoric could cause one to think differently, the two groups may not be as different as some would conclude. Industry professionals can capitalize on areas where they appear to be in synch and tailor their programs in areas where they differ. The data seems to indicate that the rift is closing rather than widening.