The report from Transamerica Retirement Solutions, called “Retirement Plans for Institutions of Higher Education,” shows colleges and universities are cutting the number of service providers they use to ease administrative burdens and reduce plan costs.
Between five and 10 years ago, the report shows, higher education institutions largely relied on multiple providers for retirement plan management. Today, institutions are almost evenly split among those using a single provider (52%) and those with multiple providers for 403(b) plans.
“Like most companies and organizations, institutions of higher education are challenged with the task of reducing costs and creating efficiencies without experiencing loss in service,” says Brodie Wood, vice president and national practice leader of not-for-profit clients at Transamerica. “The survey indicates the growing trend is these institutions are actively seeking retirement plan providers that can administer all their retirement plans to achieve administrative efficiencies and cost reduction.”
The trend has led many higher education institutions to shift to a consolidated contract structure, with many institutions moving from individual to group contracts. According to the report, less than one-third of higher education institutions offer only individual contracts (31%), and almost as many have completely abandoned individual contracts (28%).
Other report findings show institutions are also reducing plan investment options. Historically, institutions have offered nearly unlimited options, which left employees the task of evaluating hundreds of choices. Today, staff and faculty can access an average of 21 investment options.
This narrowing of investment options has been driven, in part, by Internal Revenue Service regulations that established an oversight requirement for 403(b) plans in 2009, the report shows.
“This consolidation helps [institutions] streamline costs and eliminate account fees for all plan participants,” Wood says.
To request a copy of “Retirement Plans for Institutions of Higher Education,” email firstname.lastname@example.org or call 888-401-5826.