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First 403(b) Target-Date Fund Survey Released

New Research from the Profit Sharing/401k Council of America Gives Insight into Transitioning 403(b) System

July 7, 2009 (Des Moines, IA) — Not-for-profit organizations are embracing target-date funds for their 403(b) plans. A new survey from the Profit Sharing/401k Council of America (PSCA) found that the majority of 403(b) plan sponsors surveyed offer target-date funds, and nearly a quarter of organizations that do not currently offer them plan to within the next year.

The first-of-its-kind 403(b) Target-Date Fund Survey, sponsored by the Principal Financial Group®, shows that more than half (51%) of the respondents offer target-date funds as investment options in their 403(b) plans. The study also found that the number of 403(b) plans using target-date funds as the default investment option more than doubled since 2007. PSCA has seen a similar trend in 401(k) plans.

"Thousands of not-for-profit organizations in the U.S. rely on employee benefits such as 403(b) plans to compete for the best employees," says David Wray, president of PSCA. "This survey shows that 403(b) plans are evolving to more closely resemble 401(k) plans."

"This new insight into 403(b) plans comes at a critical time," said Aaron Friedman, national practice leader—non-profit, The Principal®. "It provides helpful benchmarking data for non-profit organizations who are scrambling to meet new regulations imposed by the IRS."

The survey revealed widespread satisfaction with target-date funds. More than 58 percent of respondents reported being either satisfied or very satisfied with their target-date funds. Items deemed most important by respondents in developing a successful target-date fund offering include:

  • Diverse asset allocation
  • Quality of underlying investment managers
  • Liability risk minimization
  • Cost control

In other evidence of 403(b) plans' evolution, use of automatic enrollment in respondents' 403(b) plans increased to 27.3 percent from 16.5 percent in PSCA's 2008 403(b) Plan Survey. Automatic enrollment use within 401(k) plans has also increased steadily over the past several years.

The 403(b) Target-Date Fund Survey—part of an ongoing series of PSCA surveys on 403(b) plans—was conducted in May of this year and reports on the current plan practices of 144 403(b) plan sponsors from across the country. Find full survey results at www.psca.org.

About PSCA

Established in 1947, the Profit Sharing/401k Council of America (PSCA) is a national, non-profit association of 1,200 companies and their six million plan participants. PSCA represents its members' interests to federal policymakers and offers practical, cost-effective assistance with profit sharing and 401(k) plan design, administration, investment, compliance and communication. PSCA's services are tailored to meet the needs of both large and small employers. Members range in size from Fortune 100 firms to small, entrepreneurial organizations

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 $236.6 billion in assets under management[2] and serves some 18.8 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 www.principal.com.

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[1]
"The Principal Financial Group" and "The Principal" are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
[2]
As of March 31, 2009
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