More 403(b) plans offer target date options as part of streamlined investment platforms

Nonprofit organizations that sponsor 403(b) plans are simplifying investment platforms by streamlining the options available for investors, according to the sixth annual Plan Sponsor Council of America’s (PSCA) 2014 403(b) Plan Survey. Sponsored by the Principal Financial Group®, the survey found that more plans are offering target date investment options as part of a slimmer overall investment platform and that more plan sponsors are retaining investment advisors, possibly reflecting a growing recognition of fiduciary responsibilities under ERISA.

“403(b) plan sponsors are continuing to make progress in building retirement programs that can help lead to better outcomes for participants,” said Bob Benish, executive director of the PSCA. “Overall we continue to see positive changes including working with investment advisors, which may be why plans are offering fewer investment options. Slow but steady progress is the most sustainable kind. It reflects the strength of the current employer-sponsored retirement system.”

Key findings

The PSCA survey found that 403(b) plan sponsors offered an average of 26 investment options in 2013, down from 31 in 2012. 403(b)s with the highest average participation rate (72.2%) are those with between 15 and 20 investment options.

According to the survey, three-quarters of 403(b) plans now offer target date investment options, a steady increase since 2009 when they were included in just over half of plans.
More than half (51.3%) of sponsors retained independent investment advisors to assist with fiduciary responsibility, compared to 46% in 2012, the survey found.

Plan sponsors increased the use of e-mail significantly over the past five years from 51.5% in 2009 to 71.8% in 2013, the PSCA found. In addition, webinars more than doubled from 9.7% in 2009 to 26% in 2013; 60% used one-on-one meetings with service providers, up from 54.2% in 2012 and more than a third (34.5%) used individually targeted communications.

The PSCA also found that 16% of sponsors now automatically enroll employees, up from 14.6% in 2012 and more of those plans included automatic annual increases (20.7% in 2013 compared to 16.9% in 2012).
Aaron Friedman, national tax-exempt practice leader, The Principal, said that financial professionals can use the survey results to help existing clients benchmark their plans. The results can help identify gaps and create reasons to approach prospects as well, he added.

Source: PSCA press release.
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