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Retirement Planning > Saving for Retirement

Higher contributions, better balances among 403(b) plans

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Contributions by plan participants in non-profit-sponsored 403(b) retirement plans rose during the year past, the increases resulting in higher average account balances, according to a new survey.

So reports the Plan Sponsor Council of America in its 2015 403(b) Plan Survey. PSCA’s 7th annual benchmarking survey of 403(b) plans, sponsored by the Principal Financial Group, polled 478 not-for-profit organizations.

A key finding of the report is the 13.9 percent rise in plans offering an employer contribution: up to 96.6 percent in 2014 compared to 82.7 percent in 2013.

“The large jump in plans offering employer contributions is one of the most noteworthy findings in this year’s survey,” says Hattie Greenan, PSCA’s director of research and communications. “Non-profits recognize their role in helping employees save, and the nearly universal adoption of employer contributions is proof of that commitment.” 

Average account values among 403(b) plan participants grew to $62,513 in 2014, compared to $54,600 in 2013. Participants contributed an average of 6 percent of their annual pay to their account, up from 5.8 percent in 2013. In addition to participant contributions, the survey shows nearly a quarter of 403(b) plan sponsors match employee contributions dollar for dollar on the first 5 percent or 6 percent deferred. 

While the survey uncovered many positive developments in the 2014 plan year, adoption of some plan features remained stagnant. Just 16.2 percent of 403(b) plans use automatic enrollment, up slightly from last year’s 16 percent.

“The low take-up rate on automatic enrollment for 403(b) plans continues to be disappointing. It greatly lags that of 401(k) plans, which sits at more than 50 percent,” says Aaron Friedman, national tax-exempt practice leader at Principal Financial. “There’s definite room for improvement here, and an opportunity for advisors to work with plan sponsors to design plans that help create the best outcomes for participants.”  

While the number of plans adopting automatic enrollment remains low, those that have are migrating toward more appropriate savings rates: 20.3 percent of plans with automatic enrollment set the default at 5 percent of pay or greater, which is up from 16.9 percent in 2013.

Other key findings from the survey include:

  • The availability of Roth contributions has more than doubled in the last five years with 25.2 percent of 403(b) plans currently permitting the after-tax contributions.  

  • Half of plans with 1,000 or more participants offer the Roth feature, while only 10.9 percent of organizations with fewer than 50 participants offer it; 10.8 percent of participants made Roth contributions when permitted.

  • The most popular services provided to participants via their mobile devices include balance inquiries (12.7 percent), investment changes (9.6 percent) and plan inquiries (9.3 percent).

  • Nearly half (46.7 percent) of organizations use an independent retirement plan advisor separate from their service provider. The most common services provided include investments (73.6 percent), plan design (64.4 percent), participant education (60.3 percent) and provider selection (52.3 percent). 


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