Increased Plan Participation Among Health Care Workers

September 7, 2005 ( - The American Hospital Association (AHA) reports that the median participation rates of health care employees for 403(b) and 401(k) plans each increased 5% over the last year.

This is a finding of the third annual survey, Retirement Plan Trends in Today’s Healthcare Market – 2005, conducted with Diversified Investment Advisors. In an AHA press release on the survey, David Ray, a vice-president and not-for-profit practice leader at Diversified attributes the increase in participation to the loss of defined benefit plans, uncertainty about social security, improved investment returns, less strict age and service requirements, and the great amount of press on the need for retirement saving.

The survey also shows a correlation between employer matching rates and participation, according to the news release. As the 2004 survey showed, retirement plans with a “dollar-for-dollar” match have much higher average participation rates (69%) than plans that match 25 cents on the dollar (See Health Care Employers Find Plan Participant Success with Matches ).

More small plan sponsors offer an employer contribution, the survey showed, 90% offered one this year compared to just 80% in 2004 and 73% in 2003. Ray added, in the release, that there is also an increase in the offering of 401(a) plans, usually funded solely with employer contributions. However, 403(b) plans are the most prevalent in the health care market, with 75% of employers offering them. Forty percent of respondents offer 457(b) plans, while 34% offer 401(k) plans, according to the news release.

Survey respondents indicated that they are outsourcing more functions to their providers than they did last year. The most commonly outsourced functions were processing minimum distributions (59%), administering loans (58%), and processing hardship withdrawals (55%).

Other key findings of the survey, mentioned in the release, were:

  • 80% of respondents said they were still concerned with both educating and encouraging employees to take appropriate actions such as enrolling in their plans, saving adequately and investing appropriately when asked about their top challenges as a plan sponsor. Forty-six percent are concerned about keeping up with regulations.
  • For plans other than 403(b) plans, 27% of plan sponsors have no minimum age requirement for plan entry, and 30% of those same plan sponsors have no service requirement for entry.
  • Plan sponsors offer a more limited number of funds than in the past two years. For example, only 26% of plans offer more than 20 investment options, compared with 30% of plans just a year ago and 40% of plans two years ago.
  • Employee education and guidance continue to be critical to a plan’s success, the 2005 Survey showed employee education is the top priority of anticipated plan changes, with 80% of plan sponsors having this goal. In fact, 95% of plan sponsors with 10,000 employees or more expect to improve their employee education programs.

To request a copy of the report on the survey of 360 hospital administrators, go to or call 800-242-4677.