Participation, Contributions Climb in 403(b) Plans
October 02 2019 - 8:30AM
Business Wire
Survey also finds growing interest in financial
wellness programs.
Organizations that sponsor 403(b) plans reported growth in plan
participation and contribution rates, according to the eleventh
annual 403(b) plan survey from the Plan Sponsor Council of America
(PSCA). The survey, which is sponsored by Principal Financial
Group®, reported increased contributions by both participants and
organizations continued to have a positive impact on retirement
readiness. Supporting those developments, the survey found a strong
interest in financial wellness programs.
“These 403(b) programs are offered by an exceptionally diverse
group of employers, both in size and workforce composition, and
this year’s survey reflects both the diversity in designs alongside
a number of consistent encouraging trends to help workers prepare
for a successful retirement,” notes Hattie Greenan, director of
research and communications at PSCA.
PSCA’s 2019 403(b) Plan Survey, based on responses from nearly
600 non-profit organizations across the U.S., is the only
independent 403(b) research report that delivers actionable data on
trends among plan sponsors in the non-profit sector.
Top trends
- Increased average contributions promoting retirement readiness
- Plan sponsor contributions up to 5.5%, from 4.7%
- Participants now contribute 6.6% of pay, up from 6.3%
- Retirement advisors needed
- Nearly half (46.6%) don’t currently work with one
- Financial wellness programs gaining momentum
- A quarter (26.7%) already have a formal plan in place; nearly
half (47%) have plans or interest in implementing one
Higher, better participation Plan sponsor
contribution rates rose in the last year to an average of 5.5% of
pay (up from 4.7% a year ago), and more workers benefited sooner
from those contributions as the number of organizations offering
immediate eligibility also rose. The survey also found an increase
in participant contributions, now an average of 6.6% of pay, and
responding employers noted a remarkably robust 81% rate of
participation. Combined, employer and employee contributions
average over 12% of pay. Plan design features like automatic
enrollment, currently in place at one-in-five (21.8%) responding
organizations, encourage higher participation and contributions.
More than a third of those plans (37.7%) use a default deferral
rate higher than 3%.
“It’s encouraging to see the increased engagement evidenced by
higher contribution and participation rates,” said Luke
Vandermillen, vice president of retirement and income solutions at
Principal. “Plan sponsors have taken the lead by increasing
contributions and adapting plan designs to encourage more
participation, which not only improves retirement readiness but
also serves as a differentiator in a tight labor market.”
Fiduciary focus The survey, which has previously
noted an increased emphasis on fiduciary responsibility by plan
sponsors, found that a growing number rely on the use of an
investment policy statement (IPS). More than 60% of plans have one
in place, a 40% increase over the past decade.
“An investment policy statement is one of the best ways to
demonstrate the related fiduciary responsibility which has become
increasingly important in the current heightened regulatory
environment,” said Vandermillen. “Working with a financial advisor
or consultant who specializes in retirement plans can have a big
impact on putting the right documentation in place, overcoming
fiduciary concerns and helping ensure the plan and participants
achieve goals.”
Yet, nearly half of the organizations surveyed do not currently
work with a retirement plan advisor. Another 4 in 10 indicate they
aren’t yet evaluating whether their plan is meeting its goals, an
area where advisors and consultants can help.
Healthy interest in financial wellness programs
Responding to a new question in this year’s survey, a quarter of
organizations already have a financial wellness program in place
and nearly half (47%) have plans or interest in implementing one in
the future.
“While workers in the non-profit sector have always had a strong
commitment to their profession and its mission, it’s exciting to
see growing interest by their employers in helping those workers
take better care of their financial well-being,” notes Greenan.
“It’s an emerging best practice, and one that stands to benefit
both workers and their employers.”
About the PSCA 403(b) Plan Sponsor Survey PSCA,
part of the American Retirement Association, conducted its tenth
annual survey of 403(b) plan sponsors in the spring of 2019. The
survey received responses from 580 non-profit organizations that
currently sponsor a 403(b) plan for employees and range in size and
industry from small community-based organizations to large hospital
and university systems. For more information, visit 2019 403(b)
Survey Report.
About the Plan Sponsor Council of America The Plan
Sponsor Council of America (PSCA) is a diverse, collaborative
community of employee benefit plan sponsors, working together on
behalf of millions of employees to solve real problems, create
positive change, and expand on the success of the
employer-sponsored retirement system. With members representing
employers of all sizes, we offer a forum for comprehensive
dialogue. By sharing our collective knowledge and experience as
plan sponsors, PSCA also serves as a resource to policymakers, the
media and other stakeholders as part of our commitment to improving
retirement security for millions of Americans.
About Principal® Principal helps people and
companies around the world build, protect and advance their
financial well-being through retirement, insurance and asset
management solutions that fit their lives. Our employees are
passionate about helping clients of all income and portfolio
sizes achieve their goals – offering innovative ideas,
investment expertise and real-life solutions to make financial
progress possible. To find out more, visit us at principal.com.
Insurance products and plan administrative
services provided through Principal Life Insurance Co. Securities
offered through Principal Securities, Inc., 800-547-7754, member
SIPC and/or independent broker-dealers. Principal Life, and
Principal Securities are members of the Principal Financial Group®,
Des Moines, Iowa 50392. PSCA is not an affiliate of any company of
the Principal Financial Group. Principal, Principal and symbol
design and Principal Financial Group are trademarks and service
marks of Principal Financial Services, Inc., a member of the
Principal Financial Group. © 2019 Principal Financial Services,
Inc.
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version on businesswire.com: https://www.businesswire.com/news/home/20191002005490/en/
Lonnetta Ragland, Principal, Ragland.Lonnetta@principal.com,
(515) 878-1504 Hattie Greenan, PSCA, hattie@psca.org,
(540) 323-7828
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