403(b) Plans Increase Use of Advisers and Online Communications

A 403(b) plan sponsor survey from the Profit Sharing/401k Council of America (PSCA) and The Principal reveals sponsors are increasingly asking for help from investment advisers.

The Principal Financial Group, which sponsored the survey, said more than 45% of respondents use an independent investment adviser to help with fiduciary responsibilities, versus 41% in 2009. Forty-six percent of respondents indicated they have an investment policy statement, while 34.6% of plans are unsure if their plan has an IPS.   

Just over 77% of respondents use an auditor, recordkeeper or aggregator to prepare their Form 5500, up from 66.1% in 2009. The survey found 84.1% of plans file a form 5500. The form 5500 is prepared by the recordkeeper at 34.3% of organizations, by the auditor at 28%, and by a form 5500 aggregator at 14.9% of organizations.   

While the most common participant education approaches are enrollment kits (89.6% of organizations) and on-site one-on-one meetings (63.1%), there has been an increase in the use of electronic methods to educate participants, with 59.5% using e-mail, versus 51.5% in 2009, and 50.2% using Intranet/Internet, versus 43.9% in 2009. Fifteen percent used Webinars in 2010, compared to 9.7% in 2009.  

“This year’s survey proves that 403(b) plan sponsors are still working hard to comply with the new regulations,” said David Wray, president, PSCA, in the press release. “Although the rate of change has slowed since our 2009 survey, there are still significant adjustments underway as plan sponsors respond to the needs of their participants and their plans.”


Help for Participants  

The Profit Sharing/401k Council of America’s 2011 403(b) Plan Survey, sponsored by the Principal Financial Group, finds more sponsors added plan features or services to help participants with savings and investments.Twelve percent of plans responding to the survey have an automatic enrollment feature. Automatic enrollment is more prevalent for large plans (29.6% of plans with 1,000 or more participants).  

The most common default investment options are target-date funds (34.2% of plans), followed by lifestyle funds (28.9% of plans).The survey found just over 69% of plans offer a target-date fund as an investment option (up from 51.2% in 2009).  

Catch-up contributions for participants age 50 and over are permitted in 93% of plans, and 15.4% of eligible participants made catch-up contributions in 2010. Of organizations that permit catch-up contributions, 21.1% match them. In 2010, 16.9% of 403(b) plan sponsors surveyed permitted Roth after-tax contributions, up from 13.9% in 2009 and 10.9% in 2007. Roth availability is more common at large organizations with 27.8% of plans with 1,000 or more participants offering Roth.  Over 9% of participants made Roth contributions when permitted.  

Nearly 22% of organizations offer investment advice to participants. The most common type of advice offered is one-on-one counseling in person (88.5% of organizations).  


Plan Stats  

Eighty-five percent of employees at organizations that responded to The Profit Sharing/401k Council of America’s 2011 403(b) Plan Survey are eligible to participate in their organization’s 403(b) plan. The average percentage of eligible employees with a balance in the plan is 74.7%. An average of 64.2% of eligible employees contributed to the plan in 2010. The average account balance for active plan participants is $70,794.    

Three-quarters of plans in the survey are governed by the Employee Retirement Income Security Act (ERISA), 15.6% are non-ERISA, and 10% of respondents were unsure of their plan’s ERISA status. Seven percent of non-ERISA plans are considering becoming ERISA plans.   

Nearly 83% of organizations make contributions to their 403(b) plans. Thirty-seven percent make matching contributions only, 29% make non-matching contributions only, and 16.7% make both matching and non-matching contributions to the plan.  The majority of organizations made contributions in 2010 when provided for in the plan including 96.5% of plans with only matching contributions and 94.1% with only non-matching contributions.  The average organization contribution per active participant in 2010 was $3,450, and the median contribution was $2,364.   

Nearly all (96.4%) plans permit participant contributions. Pre-tax contributions are permitted in 95.6% of plans, while Roth and 401(m) after-tax contributions are permitted in 19.5% of plans. Nearly 7% of plans require participants to contribute to the plan as a condition of employment. 


Fifty-seven percent of plans provide immediate vesting for non-matching employer contributions, and 60.5% of plans provide immediate vesting for matching contributions. Among plans that do not provide immediate vesting, graduated vesting is the most common arrangement for both matching and non-matching contributions.  

Plans offer an average of 26 funds for organization contributions and an average of 28 funds for participant contributions.  Twenty-one percent of plans have between 21 and 50 funds and 11.3% have more than fifty funds available for participant contributions.    

Three-quarters of plans allow participants to take hardship withdrawals, and 1.6% of plan participants took a hardship withdrawal in 2010 when permitted. Seventy-two percent of plans allow participants to borrow against their plan assets; 49.5% allow loans for any reason, while 22.6% allow loans only in hardship situations.   

The survey, sponsored by the Principal Financial Group, drew responses from a record number (712) of 403(b) plan sponsors, an increase of 29% from the previous year’s survey.   

Full survey results are may be purchased from PSCA at http://www.psca.org.