It can be said that, in getting in compliance with new regulations, 403(b) sponsors have done in two years what 401(k) sponsors had years to perfect. Though there are still some kinks to iron out—industry groups recently have called again for more guidance on Form 5500 plan audit requirements, for example—403(b) sponsors can take a breath and focus now on perfecting their plans.
Though products and features are ever-evolving, as far as processes go, Chris Cumming, Senior Vice President, Defined Contribution Markets, Great-West Retirement Services, contends 401(k) plans “have figured it all out.” Sponsors of 403(b) plans can look to their 401(k) plan brethren for guidance.
Jeff Capone, Investment Consultant at Windsor, Connecticut-based Fiduciary Investment Advisors, LLC, says it is important to think about how much 403(b) plans are migrating to the 401(k) model. His firm, which has tripled the number of 403(b) clients and doubled assets in this market over the last year, due in part to an explosion of growth in its 403(b) plan business, expects that, in a few years, 403(b)s will look like 401(k)s, and those attributes that are seen as making a good 401(k) program will be adopted as best practices by 403(b)s as well.
According to Capone, 403(b) sponsors already are asking about best practices and how to improve their plans. He says the answer is better fiduciary governance, a streamlined investment menu, improved costs, and reduced administrative duties. Cumming agrees that lowering costs is important and that simplifying administration makes it easier to comply with regulations.
Linda Segal Blinn, J.D., Vice President of Technical Services, ING, says, from a sponsor’s perspective, a 403(b) program is good if it is compliant with Internal Revenue Service rules and the Employee Retirement Income Security Act (ERISA), if applicable. While Ketul Thaker, National Director, Education Market for ING U.S. Retirement Services, agrees that is the number one thing, he says another significant trait of a good 403(b) is good participant outcomes.
According to Thaker, a plan that meets the needs of participants—maximizing participation and savings rates, providing tools to help them plan for retirement, and providing encouragement to save—is a good plan. To that end, Cumming notes that 403(b) programs traditionally have had low participation rates relative to 401(k)s, and suggests that a good plan adopts auto-plan features—automatic enrollment, auto-deferral increases—to combat this trend.
In addition, Cumming says a good plan should offer help to participants, addressing all investor types, and using multiple communications media, bringing information to participants in the way they want.