Fifty-three percent of religious institutions, 40% of hospitals, 36% of health care, 31% percent of library/ museums, and 28% of K-12s/ associations and higher education organizations reported having a TPA-serviced 403(b) plan. The most common TPA-provided services are recordkeeping (87%), testing/ limit monitoring (68%), and common remitter (27%).
The analysis found that most of the TPA-serviced plans have an investment policy statement (54%), compared to 46.2% among all respondents. But, 30% are uncertain if they do.
TPA-serviced 403(b) plans have an 11% lower participation rate than all organizations in the survey (63.7% vs. 74.7%).
The most popular match formula used by TPA-serviced plans is dollar for dollar up to 5% (reported by 16% of respondents), followed by dollar for dollar up to 3% (reported by 15% of respondents). Utilization of those formulas is almost the same for all plans in the survey, The Principal said.
There is almost an even split between plans which offer (46%) and do not offer (54%) non-matching contributions. Those which do offer guaranteed non-safe harbor contributions (45% of respondents) followed by discretionary (reported by 41% of respondents). The percent of non-matching contributions varies widely from 0% to 15% without any particular percentage dominating the landscape.According to the analysis, the majority of TPA serviced plans (76%) did not make any changes to their plan during the last year.
How Fees are Paid
An analysis by The Principal Financial Group of respondents to PSCA’s 2011 403(b) Plan Design Survey who are serviced by TPAs revealed how fees are paid by 403(b) plans.
Audit fees are primarily paid by the organization (77%), followed by the plan (20%), as are fees for communication to employees – 53% primarily paid by organization, 29% by the plan.
Compensation of internal administrative staff is primarily paid by the organization (80%) followed by the plan (18%), while investment management fees are primarily paid by the plan (61%) followed by the organization (24%).
Investment consulting fees are primarily paid by the plan (49%) followed by the organization (39%), and legal fees are primarily paid by the organization (67%) followed by the plan (22%).
Plan recordkeeping fees are almost evenly split between the plan (46%) and the organization (42%), as are trustee fees – 46% by the plan and 43% by the organization.
A shared approach to cost is very infrequent (almost never exceeding 10% threshold) in all of the categories, except communication to employees and investment management fees categories where they are reported by 16%-17% of respondents.The PSCA survey revealed 403(b) sponsors are increasingly asking for help from investment advisers and their plan providers and are rolling out more online communications to participants (see 403(b) Plans Increase Use of Advisers and Online Communications).