403(b) Plans Surviving the Economic and Regulatory Climate

PSCA’s 403(b) Plan Response to Changing Conditions finds the majority of 403(b) plan sponsors made no changes to their matching contribution (73.3%) or to their non-matching organization contribution (74.6%) in the last three years. Fourteen percent of 403(b) plan sponsors that offered a matching contribution on December 31, 2007, have suspended it, with 40% of those organizations already restoring it.   

Of organizations that offered a non-matching contribution on December 31, 2007, 12.5% suspended it, with 30.2% already restoring it, according to a summary of the survey results.  

Plan sponsors took a variety of actions in the last year in response to regulatory and economic changes; 47.9% of organizations increased their employee education efforts, and 22.6% of organizations added investment advice for participants. Thirty percent of organizations changed the investment lineup, including 48% of large organizations.   

According to the survey results, 403(b) plan sponsors are also scrutinizing fees more closely, with 49.7% of respondents doing so (74% of large organizations). Less than half (46.6%) of organizations have an accountable committee responsible for reviewing fund performance and/or plan compliance (82% of large organizations).  

Organizations indicated that participants are continuing to contribute to their plans; 40% of organizations reported no change to plan participation rates, and 37.9% indicated an increase in plan participation. Only 14.5% of organizations indicated a decrease. However, 92% of organizations that suspended the matching contribution reported a decrease in plan participation, and 44% of plans that restored their matching contributions reported in increase in participation.  

In addition, employees contributing to the plan are maintaining deferral levels. More than 50% of plans reported no change to participant deferral rates, and 11.4% indicated an increase. Only 13.1% indicated a decrease. Similar to decreases in plan participation rates, more organizations that suspended the matching contribution indicated a decrease in participant deferral levels (57.9%) than those that made no change (12.4%).   

PSCA’s 403(b) Plan Response to Changing Conditions reflects responses from 599 not-for-profit organizations that currently sponsor a 403(b) plan. 

The survey report is at http://www.psca.org/PUBLICATIONS/SurveysData/tabid/77/Default.aspx.