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Not-for-Profits Committed to 403(b) Plans Despite Stormy Economy

New economic impact study from Profit Sharing/401k Council of America reveals most maintained matches, increased education.

December 2, 2009 (Des Moines, IA) - Even in the face of budget cuts and other financial pressures stemming from the recession, not-for-profit organizations remain committed to their 403(b) retirement plans. According to the just-released "Impact of Economic Conditions on 403(b) Plans" study from the Profit Sharing/401k Council of America (PSCA), nearly three-fourths (73.4 percent) of 403(b) plan sponsors surveyed did not change their employer match during the 2008/2009 plan year.

The study, which was sponsored by the Principal Financial Group®, also reveals that 403(b) plan sponsors boosted their employee education efforts.

Forty-three percent of plan sponsors surveyed say they increased employee education because of the economic conditions. Another 17 percent added investment advice for employees.

"Retirement plans are a vital part of not-for-profits' strategies to attract and retain the best employees. The study shows that a large majority of them stepped up to the plate to support the plans - and their employees - during the recession," says David Wray, president of PSCA.

Employees themselves stayed the course during the economic downturn. Only 16.6 percent of plan sponsor respondents reported a decrease in plan participation during 2008/2009, and just 16.9 percent experienced a drop in employee deferrals.

However, participation did suffer among those organizations that suspended their matching contribution. Just over 50 percent of organizations that suspended their match reported a decrease in plan participation compared to only 12 percent of organizations that did not make changes to the match.

403(b) Impact Similar to 401(k)

Findings from the 403(b) economic impact study mirror results from PSCA's recent 401(k) economic impact study. More than 76 percent of 401(k) plan sponsors say they made no changes to their matching contributions in 2008/2009.

Other interesting findings from the survey include:

  • Among 403(b) plan sponsors who reduced their matching contribution, 23.5 percent will reinstate the match during the next six months. Among 401(k) plan sponsors who reduced the match, 41.3 percent will restore the match during the next six months.
  • Smaller organizations were more likely to report reducing or suspending their non-matching contributions. Larger organizations were more likely to reduce or suspend their matching contributions.
  • A surprising portion (13.3 percent) of 403(b) plan sponsors is unsure of their ERISA status.

"This finding is disconcerting because 403(b) plan sponsors who are not aware of their Employee Retirement Income Security Act of 1974 (ERISA) status may be overlooking important ERISA compliance requirements," said Aaron Friedman, national practice leader - non-profit, The Principal®. "This highlights the need for greater ERISA education at not-for-profit organizations."

The "Impact of Economic Conditions on 403(b) Plans" survey - part of an ongoing series of PSCA surveys on 403(b) plans - reports on the 2008-2009 experience of 609 403(b) plan sponsors from across the country. Find full survey results at

About the Profit Sharing/401k Council of America

The Profit Sharing/401k Council of America (PSCA), a national non-profit association of 1,200 companies and their 6 million employees, advocates increased retirement security through profit sharing, 401(k) and related defined contribution programs to federal policymakers and makes practical assistance with profit sharing and 401(k) plan design, administration, investment, compliance and communication available to its members. PSCA, established in 1947, is based on the principle that "defined contribution partnership in the workplace fits today's reality." PSCA's services are tailored to meet the needs of both large and small companies with members ranging in size from Fortune 100 firms to small, entrepreneurial businesses.

About the Principal Financial Group

The Principal Financial Group® (The Principal®)[1] is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance, and banking through its diverse family of financial services companies. A member of the Fortune 500, the Principal Financial Group has $280.4 billion in assets under management[2] and serves some 18.6 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit


The Principal Financial Group and The Principal are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
As of September 30, 2009.

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