Comparing Not-for-Profit and For-Profit Health Care DC Plan Data

While the 2018 PLANSPONSOR DC Survey shows that, in many ways, not-for-profit health care DC plan sponsors have adopted more “best practices” for their plans than those in the for-profit segment, the for-profit plan sponsors have more confidence in participants achieving retirement income goals.

In the health care industry, 403(b) plans still dominate the not-for-profit segment, according to the 2018 PLANSPONSOR Defined Contribution (DC) Survey.

In the not-for-profit health care segment, 67.3% of respondents offer 403(b) plans, while 47% offer a 401(k). In the for-profit segment, 96.1% offer a 401(k) and 2.6% offer a 403(b) plan. Brian O’Keefe, director of research and surveys at Strategic Insight, parent of PLANSPONSOR and PLANADVISER, explains that “for-profit” entities are often smaller, private practices, like physicians, dentists, MRI-centers, etc. while “not-for-profit” are often larger, state- nonprofit- or religious organization-sponsored hospitals.

In many ways, the survey shows not-for-profit health care DC plan sponsors have adopted more “best practices” for their plans. For example, 54.4% use automatic enrollment and 37.6% use automatic deferral escalation, either as an opt-out option or a voluntary option. Among for-profit health care DC plan sponsors, only 35.4% use auto enrollment and 31.2% use auto escalation. However, while 3% is the most common default deferral rate for auto enrollment for both segments, the for-profit segment is more likely to use a default rate higher than 3% (53.2% vs. 37.6% of not-for-profits).

Sixty-seven percent of not-for-profit health care organizations reported full-time employees are eligible to participate in their retirement plans immediately, while only 21.4% of for-profit plan health care DC plan sponsors offer immediate eligibility. In addition, 81.1% of the not-for-profit segment offers an employer match on employee deferrals, compared to 63.1% of the for-profit segment. However, for-profit health care DC plan sponsors are more likely to offer a non-elective or profit sharing contribution in their plans, 60.4% vs. 47.2%, respectively.

Asked how often they review their plan’s investment options 92.4% of not-for-profits indicated they do so annually or more often, and 84.5% of for-profits annually or more often. Among both health care segments, the most commonly reported average asset-weighted expense ratio of all investment options in their plan is less than 0.75%, or 75 basis points (bps) (84.6% not-for-profit, 74.6% for-profit).

More than half (53.4%) of not-for-profit health care DC plan sponsors said they externally benchmarked total fees paid to their DC provider/recordkeeper in past year, compared to 41.5% of for-profit plan sponsors. About two-thirds of both segments use the services of retirement plan advisers, but in the past year, 63.8% of the not-for-profit segment calculated actual fees paid to their adviser, compared to 51.2% of the for-profit segment.

Less than one-quarter (24.5%) of not-for-profit health care DC plan sponsor do not offer any retirement income products or services in- or out-of-plan to help participants with creating a retirement income stream. This is true for 56.8% of the for-profit segment.

Nearly 86% of not-for-profit health care entities reported that financial advice in some form is offered to DC plan participants, compared to 79.4% of for-profit entities. And, 44.9% of not-for-profits offer formal education/guidance on budgeting and 33.7% on credit/debt management, compared to 21.4% and 15.2% of for-profits, respectively. More than two-thirds (67.6%) of DC plan sponsors in the not-for-profit health care segment agreed with the statement that they have a responsibility to improve the financial wellness of employees, compared to 55.7% of for-profit plan sponsors that agreed.

Only 8.7% of for-profit health care DC plan sponsors measure the percent of participant who are meeting retirement income goals as a measure of success for their plans, and only 5.1% measure the percent of participants hitting their retirement income replacement goal. The numbers are 12.3% and 11.3%, respectively, among the not-for-profit segment.

Despite this, and despite the use by not-for-profit health care DC plan sponsors of many plan design and governance best practice, 22.4% of for-profit respondent agreed with the statement, “Most of our employees will achieve retirement income goals by age 65,” while on 15.9% of not-for-profit sponsors agreed.

For more information about PLANSPONSOR DC Survey industry reports, contact Brian O’Keefe at
(203) 979-3091 or