2015 Plan Sponsor Council of America survey highlights retirement plan trends from non-profit organizations and public schools, colleges and universities
DES MOINES, Iowa–(BUSINESS WIRE)– 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 account, 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 of pay or greater, which is up from 16.9 percent in 2013.
“Automatic plan 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 the Roth feature while only 10.9 percent of organizations with fewer than 50 participants offer it; 10.8 percent of 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. 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 $530.3 billion in assets under management2 and serves some 19.9 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 March 31, 2015.
Source: Principal Financial Group