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Cerulli Expects Big Changes In Teacher Plan Market

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Insurance companies still dominate the 403(b) tax-sheltered annuity plan market, and that market should grow about as fast as the corporate defined contribution plan market.

Analysts at Cerulli Associates, Boston, have made that prediction in a review of the 403(b) and 457 retirement plan markets.

The plans are used by schools, charities, government agencies and other nonprofit employers.

Insurers manage only 33% of 457 plan assets but 87% of 403(b) plan assets, the Cerulli analysts estimate.

Although 403(b) plan assets probably will grow about as fast as 401(k) plan assets, changes in the work force should lead to especially large growth in participation by teachers and employees of nonprofit health care organizations, the researchers predict.

The number of participants could grow 11% at state and local government agencies, 16% at schools for children in kindergarten through 12th grade, 22% for college and university teachers, and 27% for workers in the health care industry, the researchers predict.

Because of an influx of new teachers and pressure to reduce the number of plan providers, the changes in the public K-12 segment may be particularly radical, the Cerulli analysts write.