The health care and higher education 403(b) markets now represent two-thirds of the total 403(b) market, according to a new study.
LIMRA discloses this finding in a research report, “Exploring 403(b) Plan Practices and Trends: Healthcare and Higher Education.” The study examines the two largest ERISA 403(b) market segments, health care and higher education, to understand the similarities and differences between the segments and how they compare with 401(k) plans.
The report shows that the health care and higher education 403(b) markets now represent $485 billion, or 67 percent of the total 403(b) market. The larger segment of the two, higher education, accounts for $320 billion in assets, or 44 percent market-share. Health care’s share totals $165 billion, or 23 percent.
“As plans in these segments become more similar to their 401(k) counterparts, they become an attractive market beyond the traditional not-for-profit retirement plan providers,” says Alison Salka, corporate vice president and director of LIMRA Retirement Research. “But our research reveals that each 403(b) segment has different characteristics that influence the services they value and need.
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“Companies looking to enter this market need to understand the trends, needs and perspectives of these segments as they look to win a share of this market,” she adds. The study observes differences among the two 403(b) segments. For example, higher education plans have higher average participation rates (82 percent versus 65 percent in health care) and are more likely to offer a match (82 percent versus 72 percent). In addition, higher education plans are more likely to use multiple providers (17 percent versus 5 percent for health care).