When asked if they understand their fiduciary
responsibilities under the new regulations, an overwhelming majority of respondents
from all segments surveyed – church, public school, health and other
organizations – claimed they understand their responsibilities, according to The new 403(b) frontier Research Report.
Ninety-three percent of public school respondents said they understand their
fiduciary responsibilities, while 88% of health care and other organizations
and 84% of church plan sponsors said the same.
In addition, respondents in the health care and other
organizations segment were asked whether or not they understand the Pension
Protection Act, and 65% indicated they do.
Perhaps due to this feeling that they understand their
responsibilities, both the public school and health care and other
organizations segments showed confidence about IRS audits. Only one-quarter of
those surveyed in each segment indicated they have some level of concern about
IRS audits. Just 7% of those surveyed in the public school market indicated
they are concerned or very concerned about IRS audits, while only 6% in the
health care and other organizations segment reported being concerned or very
The survey found that third party administrators are used
by 92% of public school respondents, and the research suggests respondents may
feel more comfortable with their fiduciary responsibilities and less fearful of
IRS audits if they are utilizing a TPA.
Commitment to Multiple Vendors
While experts in the industry speculated that new
regulations would herd 403(b) plan sponsors toward a single vendor environment,
the AUL Retirement survey found many still utilize multiple vendors and those
that do seem committed to maintaining that design.
Employer Contributions Improve Participation
AUL Retirement's The
new 403(b) frontier research found a correlation between higher
participation rates and 403(b) plans that offer a company contribution. In all
three segments – church, public school, health care and other organizations -
the highest percentage of employee participation was under 25%; however, in
instances where an employer match is offered, the participation rates increase
Sixty-five percent of respondents in the church plan
segment indicated they offer employer contributions, as did 68% of respondents
in the health care and other organizations segment. According to the research
report, when there is not an employer contribution in the church segment, 70%
of those plans have less than 25% participation. However, for those
organizations that offer an employer contribution, 45% have greater than 25%
In the health care and other organizations segment, only 30%
of organizations that do not offer an employer contribution have participation
rates above 25%, but 70% of organizations that do offer an employer
contribution have participation above 25%.
In the public school segment, 93% of respondents
indicated they do not offer any form of employer contribution, and this is
likely one of the reasons this segment sees the lowest participation rates of
those surveyed, with 68% of respondents indicating they have less than 25%
Regarding other plan design issues, over half of the
church plans surveyed indicated they do not have a separate benefit formula for
ministers. In addition, 44% stated they do not offer a post-retirement housing allowance.
AUL noted that these benefits can have a great impact on attracting and
retaining quality staff.
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