Transamerica has published an updated annual survey of higher education plan sponsors, finding many are beginning to adopt the retirement plan features shown to be popular in the corporate sector.
According to Transamerica researchers, the trend “reflects the pressure on higher education institutions to offer the same competitive benefits as corporate businesses if they hope to compete for talent, allowing for a wider choice of retirement plan vendors.”
Data shows higher education institutions have achieved notable improvements in plan eligibility for full-time faculty and staff, part-time or adjunct faculty, and part-time staff. Part-time or adjunct faculty eligible to enroll grew to 26% in 2016, up 14 percentage points from 2014, the firm explains.
Transamerica finds higher education institutions also “made a marked increase in the adoption of automatic enrollment (67%) and automatic deferral rate increases (36%) for participants.’ These were significant spikes when compared to the previous two years, “which stagnated at 44% for automatic enrollment, and 24% for automatic deferral rate increases.”
“In light of a stronger focus on fiduciary responsibilities, more than three-fourths (76%) of survey respondents said they have implemented an investment policy statement, compared to 60% in 2015,” researchers explain. “Regarding investment choices within the plan, 27% of respondents offer fewer than 10 investment options, while 31% offer 11 to 15 options. Just 12% of higher education plans offer between 16 and 20 investment options, generally considered to be the ideal number for accommodating—but not overwhelming—participants with choice.”
While an impressive 95% of higher education institutions surveyed now offer an employer contribution of some sort to employees, employee contribution levels, unfortunately, are on the wane. The percentage of participants contributing $5,000 or more to their retirement account slid from 40% in 2015 to 35% in 2016, Transamerica reports.
“Correspondingly, the percentage contributing $5,000 or less rose from 60% in 2015 to 65% in 2016, with most of that increase occurring in the $1,000 to $2,000 contribution range,” researchers explain. “This is not good news for institutions hoping to make their plan participants retirement ready.”
The number of higher education institutions enlisting the services of retirement plan advisers and consultants jumped dramatically in 2016, moving to 41% of plans compared to just 17% in 2015.
“Another 24% of institutions say they plan to hire an adviser within the next 12 months,” Transamerica says, highlighting opportunity for advisers and sponsors to collaborate to boost participant outcomes. Survey responses suggest the most common role for advisers when working with retirement plans at higher education institutions is to “meet with employees to provide retirement plan education.” For Higher education institutions that use an adviser, more than half (51%) rely on their advisor for this function, Transamerica finds, and based upon the advice of consultants and advisers, many institutions have begun to see the benefit of outsourcing certain administrative functions related to their retirement plan.
“Currently, between 40% and 50% of institutions outsource services such as required minimum distributions, beneficiary designations, loan approvals, loan default monitoring, rollover verification, participant fee disclosures, and calculation of the employer match,” researchers observe.
“2016 represented another year of significant change for the higher education retirement plan market. Higher education institutions are rapidly evolving their approach to retirement plans as part of a strategy to offer competitive compensation and benefits,” concludes Brodie Wood, senior vice president of retirement at Transamerica. “While many have already made changes and added features, they are still working to improve their retirement plans by consolidating provider relationships, adding services and investment options, providing better participant education, and leaning on advisers to help put faculty and staff on the path to retirement readiness.”
The entire survey is available for download from Transamerica here.