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403(b) Plan Sponsors Making Great Strides

New survey from Plan Sponsor Council of America reveals plan sponsors’ progress, commitment to change for the better

May 22, 2012 (Des Moines, Iowa) – Sponsors of 403(b) retirement plans continue to adapt to new regulations from the Department of Labor (DOL). The not-for-profits continue to make improvements, especially to investment line-ups. These insights and more are revealed in the latest 403(b) plan sponsor survey from the Plan Sponsor Council of America (PSCA).

The survey, which was sponsored by the Principal Financial Group®, shows more stability and less uncertainty among 403(b) plan sponsors.

“The engagement of 403(b) plan sponsors is much higher than in years past. They’re adjusting to the new regulatory environment, and show a much better understanding of ERISA,” said David Wray, president of PSCA. “In many ways, sponsors of 403(b) plans are catching up to the 401(k) system.” (PDF: 188 KB)

The 403(b) plan sponsor survey, reflecting 2011 data, shows:

  • More certainty. The percent of plan sponsors who don’t know their ERISA status is down from 10.0 percent in 2010 to 6.8 percent in 2011. Twenty-percent fewer sponsors are uncertain over whether they have an investment policy statement.
  • Greater use of target date funds. This trend continues, with 72.5 percent of plan sponsors offering target date funds as an investment option, versus 69.1 percent in 2010.
  • Significant increase in Roth feature. The number of plans permitting Roth after-tax contributions has doubled in the past four years. In 2011, 21.7 percent of 403(b) plans allowed Roth, up from 16.9 percent in 2010 and 10.9 percent in 2007.
  • Enhanced education and communication. Use of email communication has increased (at 65.0 percent in 2011 vs. 59.5 percent in 2010), as has use of seminars/workshops (53.0 percent in 2011 vs. 41.8 percent in 2010). These increases likely reflect participant preferences and cost-efficiency trends.
  • Continuous review and major restructuring of investment options. Nearly 40 percent of plan sponsors made changes to the investment lineup in the last year and nearly 26 percent plan a comprehensive re-design in the next 12 months.

“The economic downturn in 2008 – 2009 had a big impact on plan sponsors,” Wray explains. “They got the message to exercise due diligence in reviewing investment options.”

The trends signal opportunities for financial professionals to provide assistance to 403(b) plans, especially those who work with TPAs. Nearly 35 percent of 403(b) sponsors report using the services of a TPA in 2011.

“We’re seeing a culture of continuous improvement among 403(b) sponsors. Financial professionals can tap into that by using survey results to help clients benchmark their programs and shed light on areas that could be enhanced,” says Aaron Friedman, national non-profit practice leader, The Principal®.

“For instance, nearly 22 percent of 403(b) plan sponsors said they are still using money market funds as the default investment option whereas the strong trend among 401(k) plans is to use target date funds as the default,” said Friedman. “That, combined with plan sponsors’ desire to continually renew investment options, could result in opportunities for financial professionals.”

Admirably, even the smallest of not-for-profits—still challenged by a slow recovery—continue, like larger plans, to demonstrate strong commitments to employee retirement security by continuing to improve and make contributions to 403(b) plans.

“That’s why this benchmarking survey is so valuable. Not-for-profits need to be able to attract and retain high performers efficiently. Strong retirement programs are critical for helping these organizations compete for talent, and they want to know what their peers are doing,” says Wray.

Full survey results may be purchased from PSCA at

About PSCA

The Plan Sponsor Council of America (PSCA) is a nonprofit association that provides services, best practice information, and advocacy to defined contribution plan sponsors. Members have access to a broad range of resources and programs that address the varying needs of both small and large companies. Membership includes 1,200 companies 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 global investment management leader including retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500®, the Principal Financial Group has $364.1 billion[2] in assets under management and serves some 17.3 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 March 31, 2012.

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