The public-sector pension crisis could help boost the profile of the only other retirement savings vehicle that governments, schools and public hospitals can rely on to help employees save for retirement: the 403(b) defined contribution plan.
Most in the industry, however, will tell you it’s a challenge to serve the 403(b) market, particularly that slice of plans that are not subject to the Employee Retirement Income Security Act. On the flip side, they’ll also tell you that the market is ripe with potential.
Specifically, the 403(b) market is, by its nature, focused on individuals because it is a voluntary, supplemental savings program, DeGrassi said.
Plan sponsors will generally give employees access to numerous 403(b) retirement plan providers, but they don’t offer automatic enrollment, auto-escalation or employer matches. Instead, they just manage an employee’s pre-tax contributions into their selected 403(b) retirement plan.
Non-ERISA plans do not have to file a Form 5500 with the Department of Labor. They are not subject to testing, fiduciary or fee disclosure rules, said Sarah Simoneaux, president of Simoneaux & Stroud Consulting Services in Mandeville, La., a retirement services industry consultant who works with both for-profit and non-profit organizations.
Bruce Ashton, a partner in Drinker Biddle’s Employee Benefits & Executive Compensation Practice Group, believes advisors should treat all plans as if they are ERISA plans because it is a “good idea anyway from a good practice standpoint.”