403(b)s Boost Participation, Contributions, Financial Wellness

Like their 401(k) brethren, 403(b) programs have taken steps to boost contribution and participation rates – and that’s not all they have in common.

According to the 11th annual 403(b) plan survey from the Plan Sponsor Council of America (PSCA), increased contributions by both participants and organizations continue to have a positive impact on retirement readiness. 

As it turns out, the employers that sponsor those programs have a burgeoning interest in financial wellness; a quarter of organizations have a formal financial wellness program in place. Nearly half (47%) have plans or interest in implementing one.

A 403(b) plan is a retirement plan maintained for employees of:

• certain governmental employers (such as hospitals or public schools);
• churches; and
• 501(c)(3) tax-exempt organizations.

The survey, sponsored by Principal Financial Group®, is the only 403(b) research report that delivers actionable data on trends among plan sponsors in the non-profit sector. The survey also found that: 

• Nearly a third of organizations now provide immediate eligibility to receive employer contributions.
• Participants contributed an average of 6.6% of pay, up from 5.4% of pay in 2011, when the survey began tracking that data point.
• Organizations contributed an average of 5.5% of participants’ pay in 2018, up from 4.7% a year ago. Combined, employer and employee contributions average more than 12% of pay.
• Automatic enrollment continues to expand, is now in place at one in five (21.8%) responding organizations – and nearly 40% of those plans now use a default deferral rate higher than 3%.
• Nearly a third of plans (32.7%) allow eligible employees to receive matching contributions immediately, up from 28.8% in 2017

More than half of organizations (53.4%) use a retirement plan advisor separate from their service provider, and more than a third of participants took advantage of investment advice when it was offered to them.

More than 60% of respondents now use an investment policy statement (IPS) – a 40% increase in the last 10 years. 

On a more ominous note, the percentage of organizations indicating they have undergone an IRS audit in the past has nearly doubled – from 8.1% in 2016 to 15.4% in 2018. 

The survey received responses from 580 non-profit organizations that currently sponsor a 403(b) plan for employees and range in size and industry from small community-based organizations to large hospital and university systems. More information is available at www.psca.org.