As an owner in a rural electric cooperative, chances are you don’t have the option of passing your business on to someone after retirement – this presents many co-ops with a critical challenge.
Cooperatives can play a pivotal role in helping their members prepare for retirement successfully by offering employee benefit programs and helping members understand them. Co-ops also use their unique relationships with providers to negotiate better pricing and terms on 401(k) plans and pension plans for their members.
One way a co-op can do this is by partnering with a national service organization. Such an entity provides affordable yet high-quality 401(k) and pension plans with world-class investment advice for participants, and also helps lower fees by prioritizing fee transparency – for instance requiring that all 401(k) plan managers transparently display all fees in a digestible format.
Partner with a provider who understands the unique needs of co-op industry. For instance, National Rural Electric Cooperative Association (NRECA) offers a 401(k) and pension plan designed specifically for rural electric cooperatives; their non-profit structure operates “at cost”, keeping administrative fees relatively low; furthermore they possess in-depth knowledge about cooperatives’ unique challenges that provide insights into improving plan design and services.
Thirdly, employers could consider offering traditional defined benefit pension plans, which provide retirement income based on wages and years of service. Historically, only a minority of private employers offered this type of retirement plan. Today however, more companies are opting to provide them as they serve as an effective recruitment and retention tool in response to rapidly rising health care costs.
At the core, each individual member should determine his/her own approach to retirement planning. While some may opt to save more than recommended amounts or take on riskier investments like stocks or mutual funds, others may prefer hybrid models that take advantage of both defined benefit plans and 401(k) plans – NRECA can assist each member in finding an approach tailored specifically towards meeting their retirement goals.