Health Care Orgs Hire Advisers, Change Plan Designs

October 26, 2009 (PLANSPONSOR.com) - The new 403(b) regulations and the recent market volatility, combined with heightened fiduciary concerns, led more health care organization retirement plan sponsors to retain a retirement plan adviser, according to a survey conducted by Diversified Investment Advisors and the American Hospital Association (AHA).

A press release said three-quarters of survey respondents reported they now have a plan adviser. In addition, 21% of plan sponsors consolidated the number of vendors used in their 403(b) plans and 20% converted to a single vendor arrangement.

More plan sponsors are outsourcing the administration of plan loans (53%), hardship withdrawals (45%) and QDROs (42%). More than one-third (37%) said that implementing a new fiduciary process associated with the new 403(b) regulations was their primary challenge.

The survey found health care plan sponsors maintain multiple defined contribution plans. Seventy-seven percent of survey respondents offer a 403(b) plan - the most prevalent DC plan offered; 62% offer a 457(b) plan; and 41% offer a 401(k) plan. Eleven percent of respondents currently offer a Roth 403(b) plan - a three percentage point increase from last year, the number of plan sponsors offering a 401(a) plan increased to 31% from 25% in 2008.

Despite the economic challenges of the past year, and organizations' efforts to cut costs, plan sponsors eliminating (4%) or reducing (8%) the employer contribution to their defined contribution plans are in the minority, according to the press release. Contribution rates among participants experienced only a modest decline in the last year, and the survey found a one percentage point decrease in the salary deferral rate among highly compensated employees since last year.

There was only a modest decline in participation rates across all defined contribution plans - 68% now versus 70% a year ago. Only 7% of participants have outstanding loans, and outstanding loan balances decreased for the second consecutive year. The median loan balance is $3,834 among survey participants.