School districts should avoid reducing the number of investment providers to protect the levels of participation in 403(b) plans, according to a new report.
The American Society of Pension Professionals & Actuaries, Arlington, Va., published this finding in a white paper that evaluates the impact of participant choice in 403(b) plans. The report explores the extent to which workers prefer choice in their 403(b) plans and the impact of having choices.
The paper reveals a decrease in the participation rates for 403(b) plans when the number of investment providers is reduced. The paper also finds that school district employees benefit from the option to receive advice, both in terms of their preparation for retirement and participation levels.
“School districts [should] consider alternatives to reducing the number of investment providers in order to reduce costs,” the paper’s authors write. “These include using an independent third party administrator (TPA) to administer the plan and providing transparent disclosure of investment fees and other expenses to workers.”