Plan sponsors of 403(b) retirement plans have made progress in the past couple of years in benchmarking themselves against plans of similar size, but there is more work to be done.
According to the Plan Sponsor Council of America in its 403(b) Plan Survey, there are still a small percentage of 403(b) plan sponsors out there that don’t know the ERISA status of their plan, 6.8 percent. Among smaller plans, those with 1 to 49 employees, that number was 12.3 percent in 2011. The bulk of the 500 respondents to the 2012 PSCA survey were ERISA-compliant plans.
What plan sponsors can do
The type and scope of educational initiatives offered by 403(b) plans continues to have an effect on the number of employees participating.
Silvia Frank, retirement program manager for Trinity Health and a PSCA board member, said that participation in her company’s plan nearly doubled after it instituted an extensive education and marketing initiative. Education is one “opportunity for plan sponsors... We encourage our associates to participate in our plan and our employee engagement is higher if they are participating in the employer-sponsored plan,” she said.
“One of the more innovative developments in the DC community was the implementation of automatic enrollment,” Wray said. Plan sponsors inform new hires and employees who haven’t previously participated in the company retirement plan that they will be automatically enrolled in the 403(b) plan unless they decide to opt out. “By doing nothing, they will begin saving for retirement in the program,” Wray said. “This has been more aggressively implemented in the 401(k) area, but clearly 403(b) plan sponsors have started down this path.”
Friedman added that there is an upward trend in the adoption of auto enrollment and that it is a “great way to get people into the plan to make sure they are saving for retirement. Most of the time it is done at a level participants’ don’t even miss.”
Facing the regulatory issues
Not only do 403(b) plans have to deal with fee disclosures from their plan providers in the next week, but they need to figure out how to best provide that information to their plan participants. The U.S. Department of Labor also is redefining its definition of fiduciary, which also could have an impact on the 403(b) industry.
In the survey, plan sponsors were asked how they currently received fee information. Nearly 38 percent said they received a paper report periodically; 29.7 percent said they received it online where the information was updated frequently; 21 percent said they received online updates occasionally; 8.1 percent said they received a paper report upon request and 19.3 percent said they received no fee information.