403(b) Sponsors Offered Help to Participants during Downturn

December 8, 2009 (PLANSPONSOR.com) – A recent survey by the Profit Sharing/401(k) Council of America, and sponsored by The Principal Financial Group found that not-for-profit 403(b) plan sponsors offered more education and advice to participants, more closely scrutinized plan fees, and made plan design changes as a result of the 2008-2009 economic downturn.

More than 43% of all organizations increased their plan education efforts, with 59% of large organizations (1,000 participants or more) doing so. In addition, nearly a quarter (24.3%) of large organizations added investment advice as an option for participants, and 17.2% of all organizations added it.

The survey found 36.1% organizations are more closely scrutinizing the fees paid by the plan and participants. Nearly six-in-ten respondents (59.4%) said they feel that their plan provider is providing fee information in a way that is easy to analyze.

Among other plan-related actions taken during the economic downturn, nearly 12% of all plans said they changed their investment lineup as a result of economic conditions, while approximately 6% said they delayed plan design changes and 5% indicated they hired an investment consultant.

Fourteen percent of not-for-profit 403(b) plan sponsors indicated they took “other” plan-related actions, which included:

  • Changing the waiting period for plan eligibility,
  • Changing the vesting schedule,
  • Changing plan providers,
  • Terminating the plan,
  • Changing from a non-matching contribution to a matching contribution,
  • Changing from a guaranteed non-matching contribution to discretionary contribution,
  • Suspending or reducing the match in 2010,
  • Offering a match in lieu of a raise or offering a choice between a matching contribution and a raise,
  • Consolidating plans,
  • Instituting automatic enrollment, and
  • Allowing hardship withdrawals.

 PSCA’s “Impact of Economic Conditions on 403(b) Plans” reflects responses from 609 not-for-profit organizations that currently sponsor a 403(b) plan.

The survey report is here.