403(b)s Simplifying Investment Menus

Non-profit organizations that sponsor 403(b) plans are simplifying investment platforms by streamlining the options available for participants.

403(b) plan sponsors offered an average of 26 investment options in 2013, down from 31 in 2012; edging closer to the average of 19 investment options in 401(k) plans, according to the 2014 Plan Sponsor Council of America (PSCA) 403(b) Plan Survey. The survey found 403(b)s with the highest average participation rate (72.2%) are those with between 15 and 20 investment options.  

More plans are offering target-date investment options as part of a slimmer overall investment platform. Three quarters of 403(b) plans now offer target-date investment options, a steady increase since 2009 when they were included in just more than half of plans (51.2%).  

The sixth annual survey also found, more than half (51.3%) of 403(b) plan sponsors retained independent investment advisers to assist with fiduciary responsibility, compared to 46% in 2012. Also, 51% of organizations reported they have an investment policy statement. Investments are most often monitored annually (44.5% of plans).

Other findings from the survey include:

  • One-quarter (25.6%) of organizations offer investment advice to participants; an average of 28.3% of participants utilized investment advice when it was offered;
  • 403(b) plan sponsors increased use of e-mail significantly over the past five years from 51.5% in 2009 to 71.8% in 2013; webinars more than doubled in from 9.7% in 2009 to 26% in 2013; 60% used one-on-one meetings with service providers, up from 54.2% in 2012; more than one-third (34.5%) used individually targeted communications; and 7% used mobile apps; and
  • Sixteen percent now automatically enroll employees, up from 14.6% in 2012; more of those plans included automatic annual increases (20.7% in 2013, compared to 16.9% in 2012).   


“403(b) plan sponsors are continuing to make progress in building retirement programs that can help lead to better outcomes for participants,” says Bob Benish, executive director of PSCA. “Overall we continue to see positive changes including working with investment advisers, which may be why plans are offering fewer investment options.”

More about the survey is at http://www.psca.org/2014_403b_report.