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What Is the Responsibility of Christian Higher-Education Institutions? 99 Geddes, Steen — Helping employees save for retirement: What is the responsibility of Christian higher-education institutions? 99 Helping Employees Save for Retirement: What is the Responsibility of Christian Higher-Education Institutions? SHERI GEDDES Hope College [email protected] TODD STEEN Hope College [email protected] ABSTRACT: A great deal of evidence suggests that most people have not made adequate provision for retirement. This paper examines the responsibility of Christian higher-education institutions that have elected to provide retirement benefits as part of their employees’ overall compensation. It also analyzes the current state of retire- ment provision at over one hundred Christian higher-education institutions. Institutions who offer retirement ben- efits should design robust policies that encourage participation, a strategy that could be advantageous to both employees and institutions. While significant plan enhancements have been made, Christian higher-education institutions appear reluctant to implement automatic enrollment and escalation features in their retirement plans. I NTRODUCTION Many employers help their workers save through the provision of retirement plans. Over the past 30 years, With the graying of the baby boom generation, more and employer-sponsored defined contribution plans have more attention is being paid to individuals’ states of readiness become a primary vehicle for helping American families for retirement. A great deal of evidence suggests that most peo- meet their long-term savings needs. For many people, ple have not made adequate provision for retirement (Munnell income generated from assets accumulated in employer- & Sunden, 2004; Employee Benefit Research Institute, 2012). sponsored retirement plans is a retiree’s only supplement to In 2010, it was estimated that only 55 percent of American Social Security benefits as defined contribution retirement families have retirement plans beyond Social Security (Federal balances accounted for 61 percent of American families’ Reserve Bulletin, 2012). For Christians, retirement planning total financial assets in 2010 (Employee Benefit Research is an important part of our stewardship responsibilities. One Institute, 2012). The number of defined contribution plans important use of the resources that God has given us is for has increased, and they are rapidly replacing defined benefit the provision of our families. The apostle Paul writes that “if plans, which are being reduced, frozen, or eliminated. The anyone does not provide for his relatives, and especially for his magnitude of the shift was demonstrated between 1986 immediate family, he has denied the faith and is worse than and 2004 when 7.5 million participants had their defined an unbeliever” (1 Timothy 5:8). Of course, this teaching does benefit plans terminated (PBGC, 2005). This movement not remove our obligation to help others who are in need, but toward defined contribution retirement plans has shifted this passage does highlight that we need to take actions to care the responsibility for retirement planning from employer to for our families, even into our retirement years. employee. This is not only impacting the private sector, but 100 CBAR Spring 2014 recent reforms have also eroded generous public sector pen- Joseph earned fame throughout Egypt and also saved his sions, leaving participants unprotected from income losses family by setting aside grain before a coming drought. In the when retirement safety nets fail. The design of employer- book of Proverbs, the ant is held out as a shining example sponsored retirement plans has serious economic ramifica- of a character who “stores its provisions in summer and tions for both employees and employers. gathers its food at harvest” (Proverbs 6:8 NIV). In the New Faculty and staff at Christian higher-education insti- Testament (Acts 6), the apostles appointed a group of seven, tutions make many sacrifices compared to employees in including Stephen, to help provide for the distribution of other organizations. They often draw lower wages and food to widows. Although not specifically targeted to saving salaries than comparably skilled and educated workers in for the future, this passage indicates the importance of allo- secular institutions and in the private sector. Since a firm’s cating resources wisely to meet various needs. In addition, contributions to retirement plans are often based on a per- it suggests that not everyone is skillful at making these deci- centage of earnings, reduced wages can also result in lower sions, as the apostles were not able to manage this process. retirement savings. We would hope then, that Christian Although saving for retirement is primarily the role of institutions would take the lead in helping their employees individuals, employers also have responsibilities with regards find creative ways to prepare for retirement. However, in a to their workers — to treat them fairly and to provide just review of retirement benefits offered by over one hundred wages. Both Jesus and Paul state that “the worker deserves Christian higher-education institutions, we find that this is his wages” (Luke 10:7 and I Timothy 5:18). Even slaves are not always the case. to be treated justly and fairly, “knowing that you also have a This paper will examine the biblical basis for retirement master in heaven” (Colossians 4:1). Jeff Van Duzer writes that savings and some of the responses from institutions of higher the “great narrative” of the Bible suggests that the purpose education. Although the paper will focus on how Christian of a business is “to serve its customers and employees” (Van higher-education institutions can enable their employees to Duzer, 2010, p. 46). Although employers are not required be faithful stewards, the philosophies discussed in this paper to, many provide retirement savings as part of an employee’s could be relevant to all employers because retirement prepa- overall compensation package. Once employers decide to ration is a national issue. We also believe that this paper provide this benefit, it is their obligation to do this justly and could be of interest to both professors and students who wisely. It can also be in their own interest to do so. study personal finance, financial management and non- A majority of retirement savings plans offered by profit institutions. First, we will review the Biblical basis for Christian higher-education institutions are defined contri- savings and outline an employer’s responsibility in provid- bution plans. However, a few church denominations still ing retirement funding. Second, we will examine the current offer defined benefit retirement plans to their employees state of retirement preparation and consider the funding and extend those benefits to faculty and staff at affiliated challenges of accumulating resources to sustain one’s finan- higher-education institutions and medical facilities. These cial needs during retirement. Third, we will review some plans are often referred to as church plans by the Internal elements that Christian higher-education institutions could Revenue Service. Church-defined benefit plans generally add to their retirement plans to encourage employee par- provide a retirement annuity for a specified period of time. ticipation and outline some potential employer responses. The derived annuity, which is often fully funded by the Finally, we will recommend the implementation of some employer, does not rely on significant employee contribu- retirement plan elements that employers can implement tions for retirement security. Employers set aside a large to encourage the financial stewardship of their employees. amount of money into investment portfolios and then hire This paper will leave to others to discuss the insufficiency professionals to manage these large asset pools and monitor of Social Security, the impact that the Affordable Care Act their risk. The income generated from these assets is used to will have on retirement, or private savings such as individual pay annuities to retired employees. This type of plan does retirement accounts. not require extensive financial expertise or elaborate retire- ment planning on the part of employees. As long as the employer sets aside a sufficient amount of funds and invests BIBLICAL BASIS FOR SAVINGS them prudently, the risks associated with these retirement AND EMPLOYER RESPONSIBILITY benefits rest almost entirely in the hands of the employer. Defined contribution plans are individual accounts com- Throughout the Bible, we are told that planning for posed of two elements: deferred employee compensation and the future is a necessary and positive activity. In Genesis 41, employer contributions. Employers offering defined contri- Geddes, Steen — Helping employees save for retirement: What is the responsibility of Christian higher-education institutions? 101 bution plans deposit money into the retirement accounts salaries are often below industry norms (since tuition is of individual employees; employees are then responsible for often the primary source for payment of salaries and ben- managing all retirement elements and risks. Unlike defined efits). This insufficient asset accumulation might prevent benefit plans, an “employer-guaranteed” income stream is employees from being financially prepared to depart aca- not associated with defined contribution retirement plans. demia when God calls them to another purpose. A study Employees are personally responsible for designing their own completed
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