DC Plans an Important Part of Higher Ed. Benefits

August 20, 2013 ( – Defined contribution (DC) plans are becoming a stronger component of higher education institutions’ benefit offerings.

By Rebecca Moore | August 20, 2013
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Sibson Consulting’s College & University Benefits Study (CUBS) found all private institutions offer a DC plan, and 96% of public institutions offer one. Institutions’ median contribution to their DC retiree income plans was 10% of compensation, which is more than three times greater than the median seen in the corporate sector.

Sibson said since the Internal Revenue Service released final regulations for Section 403(b) plans in 2007, there has been a shift toward including a “best-in-class” menu of investment options as a replacement for, or in addition to, a broader universe of funds. Additionally, there has been a significant movement to consolidate vendors for administration.

When consolidating vendors, institutions often add a brokerage account to give faculty and staff access to almost any mutual fund in order to mitigate the misperception that vendor consolidation is a reduction in choice. CUBS found nearly three-quarters of institutions have only one or two DC plan vendors.