New survey from the Plan Sponsor Council of America explores retirement plan trends among non-profit organizations
DES MOINES, Iowa–(BUSINESS WIRE)– Of non-profit organizations that sponsor 403(b) retirement plans, only 60 percent are reviewing and evaluating the investment options in their plans, according to the latest 403(b) Snapshot Survey from the Plan Sponsor Council of America (PSCA) and sponsored by the Principal Financial Group®. That number falls to just 40 percent for sponsors of small plans (1-49 participants).
However, 64 percent of large plans are receiving assistance from investment consultants. This percentage drops off sharply for small plans, with just 18 percent engaging a consultant to help review and evaluate plan investments. Additionally, more than 30 percent of respondents state their plan service provider reviews their mutual funds and nearly 9 percent answer that no one does. That total jumps to 16 percent among small plans.
“More than 90 percent of organizations indicate someone is reviewing and evaluating funds, and 86 percent are using some type of benchmark in evaluating funds. That’s great news,” said Hattie Greenan, PSCA’s director of research and communications. “However, small not-for-profits look like they could use some support, with fewer than half evaluating funds themselves and very few using an investment consultant.”
The survey also found a high percentage of plans not conducting RFPs to help ensure their plan fees are reasonable. Forty-two percent of plans do not conduct periodic RFPs. Among the smallest plans, the percentage increases to 64 percent.
“This data point, along with many others in the survey, illustrates how small plans are underserved by financial advisors and could benefit greatly from their expertise,” said Aaron Friedman, national tax-exempt practice leader at The Principal®. “Small organizations often don’t have dedicated HR personnel and could use the help from outside resources to assist them with their fiduciary responsibilities.”
A majority of plans (86 percent) indicate they benchmark their funds. The most popular elements used in benchmarking include:
- Performance (84 percent)
- Fees (69 percent)
- Risk (64 percent)
More than 40 percent of plans have not replaced any funds in the last two years, including two-thirds of small organizations.
According to the survey, plan sponsors rely heavily on their providers to deliver investment information to participants. More than half of sponsors indicate their plan provider helps participants make investment decisions, and 30 percent use an investment consultant to do so.
“It’s clear there’s a huge reliance on plan providers to offer resources for participants to determine how much to save and how to invest,” Friedman said. “And it’s encouraging to see that more than half of plan sponsors make a financial planner available to participants.”
PSCA’s 2015 403(b) Snapshot Survey reflects responses from 426 not-for-profit organizations that currently sponsor a 403(b) plan. For more research, analysis and insights from The Principal, visit The Principal Knowledge Center and connect with us on Twitter.
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 more than six million employees to solve real problems, create positive change, and expand on the success of the employer-sponsored retirement system. With more than 1,000 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. For more information, visit www.psca.org.
About the Principal Financial Group
The Principal Financial Group® (The Principal®)1 is a global investment management leader offering retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500®, the Principal Financial Group has $516.2 billion in assets under management2 and serves some 20.6 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.
Plan Sponsor Council of America is not an affiliate of any company of the Principal Financial Group.
1 “The Principal Financial Group” and “The Principal” are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
2 As of Sept. 30, 2015.
Source: Principal Financial Group