What if we could do for charitable giving what the 401k has done for retirement savings? Well, maybe we can! Enter the Flexible Giving Account.
A Flexible Giving Account, or FGA, is a pre-tax payroll deduction that would make it easier for employees to give to charity while creating much needed incentives for employees and employers to fuel charitable giving through the workplace. This revolution in Workplace Giving has been proposed under the Everyday Philanthropist Act now making its way through the halls of Congress.
The concept is similar to other pre-tax payroll deductions: 401k retirement savings accounts, HSAs, daycare or transit benefit accounts. Even before recent tax reforms became law, leading experts such as Independent Sector expressed concerns that proposed reforms could cause a reduction in charitable giving. Supporters believe that the FGA is the counter – and more! – to that concern.
The FGA is the brainchild of business owner and philanthropist Dan Rashke and his wife Patti. If you have not heard Dan’s name in charitable giving industry circles, you will. Dan is the CEO of TASC, a benefits administration company. And he is also the founder of The Greater Give, a nonprofit dedicated to promoting the cause of charitable giving through the workplace. He has been a proponent for the FGA for quite some time, and sincerely believes in the power of FGAs to inspire more giving.
CSR Matters caught up with Dan in between his busy travel schedule, running a business from his Madison, WI headquarters and traveling to Washington, D.C. to meet with Congressional sponsors and other influencers behind the Everyday Philanthropist Act. We sat down with Dan to learn more about Flexible Giving Accounts, as well as his personal passion to make a lasting impact on Workplace Giving. You will find contact information at the end of this interview.
Q1: Dan, thanks for joining us, and welcome to CSR Matters. There is a story behind your interest in Flexible Giving Accounts and your willingness to invest so much of your personal time and energy into this effort. Would you share with us how you became an advocate for the FGA?
Dan: Thanks for giving me the opportunity to talk with you about Flexible Giving Accounts, or ‘FGAs’ – and a great first question. I am a second-generation business owner, and our business is employee benefits administration. So I have spent my working life understanding the needs of employees and employers. In particular, I see how people as employees are incentivized to spend their hard-earned money through payroll deduction … for example, for benefits for themselves and their families.
So my wife and I decided to put our energies into the FGA. At a TASC leadership donor luncheon in 2008, which was part of our annual United Way Campaign, myself and another TASC associate came up with the idea for the FGA. Then in 2014 my company, TASC, started providing workplace giving administrative services. TASC then got involved with the administration of the Combined Federal Campaign, the single largest workplace giving campaign in the country, as a subcontractor for the GiveBack Foundation. That experience gave me better understanding of Workplace Giving, and it helped me figure out the logistics behind how an FGA might work. From there, we founded The Greater Give and got to work on the legislation.
Q2: You mention people being incentivized to purchase benefits through payroll deduction. Would you talk about the incentives you envision that are built into the FGA?
Dan: For any company benefit program to work, the right incentives for employee participation have to be there. In the case of the Flexible Giving Account, we have three important stakeholders coming together to incentivize employees and encourage more giving.
First are the employees themselves. Employees have the benefit of pre-tax payroll deduction. As a pre-tax contribution, the gift reduces a worker’s taxable income, which means he or she will pay less in personal income taxes. And payroll deduction makes giving easier because it spreads the gift out over 12 months. I think CSR Matters has commented in this in one or more of your blog posts – the average gift made via payroll deduction is 2 to 3 times larger than most other methods of giving.
Second, the pre-tax nature of the gift benefits employers by reducing their payroll costs, which turns this into a good business decision, to complement its CSR. Third, our government steps up. By making the FGA a pre-tax contribution, Uncle Sam is sharing in the gift-giving by agreeing to tax reductions in exchange for more money making its way to our charitable sector.
As a result, employers will be encouraged to offer their employees FGAs, just like a 401k, HSA, daycare or transit account. And employees will be encouraged to give more through their FGA.
Q3: The Everyday Philanthropist Act feels like part tax policy, part rocket fuel for charitable giving. How would you describe the legislation?
Dan: That is a good description. I am a big believer in Corporate Social Responsibility, or CSR. The incentives we were just talking about reflect something that I believe is important – I call it ‘a shared responsibility model’. As a business owner, I lean in to offer the FGA and provide payroll deduction and payment processing to a qualified 501(c)(3) charity. Our employees lean in to give. And Uncle Sam leans in by enacting the Everyday Philanthropist Act so that we make the contributions pre-tax. So that’s the tax policy part.
As for the rocket fuel, yes, we certainly hope so. I am a former United Way Campaign Chair in my community. Serving United Way and other charities brings you face to face with the many needs of our communities. For example, Giving USA recently came out with its annual report on giving. Americans gave $410 billion to charity in 2017. While that is a great number, we are only increasing our giving by a few percentage points each year. I believe we need to do more, and I want to help.
CSR Matters recently published a blog post in which you talked about the importance of engaging more employees in giving, even 1% at a time. And you compared the current level of Workplace Giving at $4.8 billion to a potential for Workplace Giving that exceeded $140 billion. I believe the Flexible Giving Account can be the rocket fuel that takes us towards that potential.
Q4: How does the Flexible Giving Account work? How are the gifts made by an employee fulfilled to the charity?
Dan: The first thing to understand is that the Flexible Giving Account is not a physical account. In fact, in drafting the legislation, we wanted to take advantage of existing processes and infrastructures for giving. The legislation establishes the pre-tax benefit status of the gift. The employee makes the charitable giving selections during an open enrollment period. Then the employer withholds the funds from an employee’s paycheck throughout the year. The employer is responsible for moving the money to one or more qualified tax-exempt organizations. This works the same way that health benefits are paid for or a 401k investment is processed.
Currently, employers have many options for managing Corporate Social Responsibility programs and processing donations made through those workplace CSR programs. The Everyday Philanthropist Act does not change any of that. In fact, success of charitable giving at the workplace depends upon those gift processors. We envision that employers will use those current providers to fulfill employee gifts – benefits administrators, CSR SaaS companies, federations, Donor Advised Funds, and if the employer wants the administrative work, even sending those gifts directly to the individual charities.
Lastly, under the proposed legislation, pre-tax charitable contributions are capped at a maximum of $5,000 per individual. This limit serves two purposes. First, to gain and keep Uncle Sam’s support, we need to recognize that Uncle Sam’s generosity has limits. The government is doing its fair share with the FGA, but ‘fair’ does not mean ‘unlimited’. Second, and perhaps most importantly, the FGA is not a wealth management tool. It is a vehicle to encourage every working American to give and to give more.
To use a term from the fundraising industry, we want to encourage the democratization of giving, because we believe our society is healthier when everyone is contributing to helping our neighbors in need.
Q5: The Trump tax reform enacted earlier this year has some charitable giving industry experts worried that with fewer taxpayers itemizing deductions, there will be a drop in charitable giving. Have you estimated the positive potential economic impact of the FGA, and if so, what is that impact?
Dan: An unfortunate byproduct of the tax reform is the increase in standard deductions, and as a result, the percentage of taxpayers who itemize could drop from 30% or more to less than 10%. Think tanks and experts have been analyzing this, and many anticipate a reduction in giving, as you indicate, but we don’t know what to expect.
The FGA is a benefit that can reach every working American. So the potential is huge. We are looking forward to the Congressional Budget Office scoring the act once it becomes a bill. Then we will all have a number to sink our teeth into.
And just to make that one point again. The reason there is so much potential for giving is because the FGA is a benefit that can reach every working American. When that happens, we really can start raising that employee participation level in Workplace Giving one percent at a time!
Q6: For readers interested in the politics, where are you in the legislative process and what remains to be done?
Dan: The good news is that we have made a lot of progress, but there is more work to do. We have written the bill. We have sponsors in the House on both sides of the aisle … which is important. And some of our sponsors are on the House Ways and Means Committee, a plus for any bill that will impact tax revenue. We also met with representatives of the Treasury Department to see if there would be possible objections from the Executive Branch. There were no issues.
We continue to build a coalition of interested supporters – businesses, charities and influencers who are willing to put their names behind this legislation. In fact, readers can go to The Greater Give website and join in. Simply click on the ‘Act Now’ button. Next up is for the bill to be introduced to Committee. Once in Committee, the bill could move through on its own or become attached to a larger piece of legislation. Then, hopefully, a vote, passage, and a presidential signing.
Q7: Do you have an expected time horizon for turning a bill into law?
Dan: I wish I could say ‘yes’, but this is an election year … so the bill may or may not make it through the process in 2018. I am expecting our sponsors to introduce the bill this summer, so as early as this month, July. From there we hope for fall passage. But we are realistic, and the legislative process is rarely easy. We may have to work the process for another year. And if that is what’s needed, The Greater Give and its supporters are committed to that.
I see this legislation as an investment for the benefit of our neighbors and communities. I believe in the work of our charities. As I mentioned before, I have seen the need first hand.
There’s an analogy that we have all heard before. Give a person a fish and that person eats for a day. But teach a person to fish and that person eats for a lifetime. I want to take that one step further … I liken Flexible Giving Accounts as making sure that the fishing industry is bigger and more sustainable for everyone’s future. Hope that makes sense.
We think the time is right to do this. Everyone is incentivized. If we can create a more giving society, then that is good for all of us – givers and recipients. And not to pick an argument with anyone, but I think we are at a time in our history when we need to encourage people to come together and act for the better.
Q8: You made a comment a moment ago about the importance of raising employee participation in giving programs at the workplace. Just how important is it to increase the number of givers and not just the total amount of money given?
Dan: It is extremely important. Advancing the ’cause’ of giving is all about building a sustainable future. Leadership giving circles and high net worth donor gifts are part of our total giving landscape, if you will. But I believe that the greatest potential for giving is achieved when everyone gives … from the executives to the workers on the frontline.
All companies of all sizes matter to our economy. And all donors of all giving sizes matter to our philanthropic economy.
Here’s another way to look at it. As the CEO of TASC, I know that our future is based on what my 1000-plus employees are doing, not just what I am doing as a CEO. That same logic applies to philanthropy. That is why we need to encourage more everyday philanthropists … hence the name of the legislation.
CSR Matters: I was going to ask you about the naming of the legislation. You beat me to it. I like it.
Now, turning from the legislation, let’s talk a bit about the process of adoption. Let’s assume good news – the legislation has passed. If we look at older pre-tax contribution vehicles in our history, we do not find immediate adoption by the public. For example, we had a long legislative history behind the 401k. Work culminated in The Revenue Act of 1978, but even with that legislation, it was a long road for businesses to transition from traditional pension plans to 401ks. With that context in mind …
Q9: What does the path for Flexible Giving Account adoption in the workplace look like?
Dan: Great question. And you are right about the timeframes associated with 401ks. But the good news here is that we have had multiple pre-tax vehicles created for and adopted by the larger public. The best known examples include 401ks, 529 educational savings programs, flexible spending accounts (FSAs), transit accounts and health savings accounts (HSAs). With each, adoption has been faster and easier.
The business community is structured for more rapid adoption than it was 10 or 20 or 40 years ago. This is due to the number of influencers acting on businesses every day. Once the legislation passes, advisers to and influencers on business will pick up on the Flexible Giving Account and bring the idea to their clients. Why? Because it is in everyone’s economic interest to do so. Accountants, tax advisers, CSR consultants, benefits and payroll providers, individual wealth advisors are just some of those advisers and influencers. Employers will bring FGAs to their employees. And employees will begin asking their employers when they will get an FGA of their own.
The reference you made to the 401k is a good one … so is the fact that it was 1978. Think back to that period when it comes to things like communication channels and technology. FGA adoption won’t happen overnight, but there will be many ‘centers of influence’ carrying the torch. And since the FGA relies on existing gift processing infrastructure, we already have the piping in the industry to facilitate fulfillment. We just need the incentive to create more giving.
Q10: How can an interested reader help?
Dan: An even better question! We welcome all of the help and support we can get. I would ask your readers to visit our website at www.TheGreaterGive.org. There you can read more about the legislation, and hopefully folks will click on the ‘Act Now’ button and sign up as a supporter. In particular, we are looking for both companies and charities – and their respective trade groups, associations or other centers of influence – to show their support. When the bill makes it to committee, the more supporters we have, the better.
On the site, you can also provide us with feedback and ask questions. We have received a number of great questions about Flexible Giving Accounts, and that helps us to improve our communications and advance the cause.
Q11: Dan, this has been a great interview. I want to make sure we leave contact information for readers. If someone has questions about the Everyday Philanthropist Act or FGAs, who can they contact?
Dan: the Greater Give Team can answer any questions. Please contact:
Alexa Bowar | Program Manager
Jason Westphal | Governmental Affairs
About the parties in this interview:
Dan Rashke is the owner and CEO of TASC, a benefits administration service provider headquartered in Madison, WI, (www.tasconline.com). Dan is also the founder of The Greater Give (www.thegreatergive.org), a nonprofit organization dedicated to advancing the interests of Workplace Giving, including the Flexible Giving Account (FGA).
CSR Matters, (www.CSRMatters.net) is a consulting practice that specializes in Corporate Social Responsibility (CSR) and Workplace Giving. We turn corporate consciences into ‘programs with purpose’ that improve the quality of our communities and the value of company brands. We work with companies, nonprofits and third-party service providers to the CSR space. You can also follow us via the CSR Matters blog.