As a human resources representative or benefits coordinator for a tribal organization, the implementation and management of your retirement plan generally fall within your responsibility. However, if your retirement plan and employee participation rates aren’t performing the way you would have hoped—or if you’re swamped with more work than expected—there may be areas within your plan that require some attention. This two-part blog post will explain the typical HR and benefits challenges we’ve encountered when working with tribal organizations and how you and your team can avoid or overcome them.
Challenge #1 Not Having Two Independent Retirement Plans
When a tribe doesn’t have two independent retirement plans, one for government employees and another for commercial, or enterprise, employees, a few issues can arise for the HR team. Retirement plans for government and commercial employees are subject to different regulations, such as ERISA and IRS compliance. When these plans aren’t properly established, the HR department faces the challenges of managing compliance issues, inefficient processes and systems, and potential risks to the organization.
With two plans created from the onset, it’s much easier for HR to coordinate employment transfers between their government and commercial entities, which frequently occur in tribal organizations. Plan documents and policies will establish how to handle the transfers while addressing compliance requirements. We recommend consulting with a plan advisor who can review your current plans and determine how your plan may be improved and what options are available to you.
Challenge #2 Having a Poor Retirement Loan Policy
Borrowing against a retirement plan may be an option available to your employees. This benefit can be especially helpful when your employees need it most, with unexpected financial hardship or unanticipated expense. However, when employees don’t use the option as a last resort, it can quickly become detrimental to the HR team and employees. For example, when misused, an employee may have multiple small loans outstanding at the same time. Employees are often unaware of or disregard the high cost of processing these types of loans and the tax penalties that may arise if they don’t pay them back within the set terms.
While it may feel convenient to use the retirement account as a revolving ATM, the high administrative costs—and the additional paperwork for the HR team—may not benefit the employee in the long term. Communicating the fees to process these types of loans and providing education regarding how retirement plan savings grow over time may help employees avoid dipping into their funds for nominal withdrawals.
Challenge #3 Not Partnering with a Financial Advisor
Any organization, including tribes, look for ways to minimize operating costs. As a result, we often see tribal organizations take on the implementation and management of retirement plans independently without the help of a financial advisor and to the disadvantage of their employees and organization.
Internally managing your plan is commendable. However, keep in mind that you could overlook many regulations and requirements in your retirement plan if you’re not working with a professional specialized in tribal organizations. Additionally, a third-party professional can help you identify areas of your program at risk, resolve compliance issues, monitor your investments, act as a liaison with your plan provider, provide employee education, and more. This assistance and guidance have the potential to take these responsibilities off of your HR and benefits team so they may focus on other employee needs.
Challenge #4 Not Investing Sufficiently in a Retirement Plan
No one can argue that providing healthcare benefits to your employees is critical to their peace of mind and well-being. However, in tribal organizations, we often see how HR and benefit coordinators invest more into healthcare and leave little or no resources for their retirement programs. When allocating little time, effort, and funds to the financial well-being of employees, tribal organizations often experience a lack of retirement benefit awareness, and lower contribution and participation rates among employees. We suggest working with a specialized professional who can explain the potential long-term benefits and help avoid the risks of insufficiently investing in your retirement programs, such as how a successful plan can contribute to your employees’ financial future and overall well-being.
Challenge #5 A Lack of Plan Education
Proper plan education among employees is the foundation to any successful retirement plan that supports them in their financial goals and future. Insufficient education, however, is the primary reason for various challenges tribal organizations face within their retirement benefits efforts. In part two of this blog post, we explain the issues that could arise related to plan education and how to avoid them for your organization and employees.
Retirement plans can be complex within tribal organizations, and managing your program requires a level of seasoned experience to help ensure you’re addressing compliance requirements while supporting your employees and tribal organization. Learn how we’ve helped North American tribes build effective and cost-efficient retirement plans for over 20 years, or contact our team to discuss your plan’s details and how we may help you optimize your program.