Growth of 403(b) Market Offers Opportunities for Providers

August 14, 2012 ( - The final implementation of 403(b) regulations is leading to more 401(k)-like plans among the largest 403(b) plans, creating new asset opportunities for investment managers and recordkeepers.

According to a Cerulli study of the large and mega defined contribution (DC) plan marketplace, political debates in cash-strapped state and local governments could lead to greater adoption of DC plans with required contribution levels that will grow assets quickly. Asset managers need to focus efforts on the large and mega markets as those markets are likely to implement new designs quicker than smaller markets. This is especially true for the high end of the mega market where opportunities will develop first, Cerulli said.   

Hospitals and higher education institutions provide the greatest opportunities in the 403(b) market, according to the study report, “The State of Large and Mega Defined Contribution Plans: Investment Innovation and the Plan Sponsor Perspective.” The potential for associated endowment and foundation assets further emphasizes the need to develop relationships with these institutions.   

Public funds sales teams need to stay abreast of developments at the state and local level. Opportunities to develop and enhance relationships with key public pension investment teams through DC specialists should not be overlooked, Cerulli suggested.