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Survey: Higher Contributions, Better Balances Among 403(b) Plans

2015 Plan Sponsor Council of America survey highlights retirement plan trends from non-profit organizations and public schools, colleges and universities

Non-profit organizations that sponsor 403(b) retirement plans saw steady increases in participant contributions, leading to higher average account balances, according to the 2015 403(b) Plan Survey from the Plan Sponsor Council of America (PSCA).  

The seventh annual benchmarking survey of 403(b) plans, sponsored by the Principal Financial Group®, also found a significant increase in the number of plans offering an employer contribution: up to 96.6 percent in 2014 compared to 82.7 percent in 2013. 

“The large jump in plans offering employer contributions is one of the most noteworthy findings in this year’s survey,” said Hattie Greenan, PSCA’s director of research and communications. “Non-profits recognize their role in helping employees save, and the nearly universal adoption of employer contributions is proof of that commitment.”  

Average account values among 403(b) plan participants grew to $62,513 in 2014, compared to $54,600 in 2013. Participants contributed an average of 6 percent of their annual pay to their plan, up from 5.8 percent in 2013. In addition to participant contributions, the survey shows nearly a quarter of 403(b) plan sponsors match employee contributions dollar for dollar on the first 5 percent or 6 percent deferred.

While the survey uncovered many positive developments in the 2014 plan year, adoption of some plan features remained stagnant. Just 16.2 percent of 403(b) plans use automatic enrollment, up slightly from last year’s 16 percent. 

“The low take-up rate on automatic enrollment for 403(b) plans continues to be disappointing. It greatly lags that of 401(k) plans, which sits at more than 50 percent,” said Aaron Friedman, national tax-exempt practice leader at The Principal®. “There’s definite room for improvement here, and an opportunity for advisors to work with plan sponsors to design plans that help create the best outcomes for participants.”

While the number of plans adopting automatic enrollment remains low, those that have are migrating toward more appropriate savings rates: 20.3 percent of plans with automatic enrollment set the default at 5 percent or greater, which is up from 16.9 percent in 2013. “Automatic features are key to helping participants reach their savings goals, but they need to be implemented the right way. It’s encouraging to see plan sponsors setting their defaults at a more appropriate rate,” Friedman said. 

Other key findings from the survey include:

  • The availability of Roth contributions has more than doubled in the last five years with 25.2 percent of 403(b) plans currently permitting the after-tax contributions.    
    -More common at large organizations: half of plans with 1,000 or more participants offer Rothwhile only 10.9 percent of organizations with fewer than 50 participants offer it; 10.8 percentof participants made Roth contributions when permitted
  • The most popular services provided to participants via their mobile devices include balance inquiries (12.7 percent), investment changes (9.6 percent) and plan inquiries (9.3 percent). 
  • Nearly half (46.7 percent) of organizations use an independent retirement plan advisor separate from their service provider. The most common services provided include investments (73.6 percent), plan design (64.4 percent), participant education (60.3 percent) and provider selection (52.3 percent).  

PSCA’s 2015 403(b) Plan Survey reports on the 2014 plan-year experience of 478 not-for-profit organizations and is available now.