Paper Claims Vendor Choice Reduction Reduces 403(b) Participation

October 7, 2011 (PLANSPONSOR.com) - The American Society of Pension Professionals & Actuaries (ASPPA) Pension Education and Research Foundation (PERF) issued research on the impact of choice and participation in school district-sponsored 403(b) plans.

PERF’s white paper, “Protecting Participation: The Impact of Reduced Choice on Participation by School District Employees in 403(b) Plans,” examines the role of choice in the 403(b) marketplace and how the elimination of investment provider choice impacts public school employees’ participation in those plans. An ASPPA press release said the paper shows that this choice is valuable to help workers prepare for retirement and maintain their participation levels. 

“The numbers from the school districts we analyzed point to a telling trend-that reduction in choice results in reduced participation. We saw reductions in participation of over 50% when the number of investment providers was reduced,” said Dr. Geralyn Miller, Associate Professor and Director of Research for the Institute for Pension Plan Management at Indiana University – Purdue University Fort Wayne, in the press release. 

ASPPA said 403(b) plans differ from 401(k) plans in that school districts with pinched budgets have less resources to develop a culture of savings – often leaving participants with more responsibility to learn about the plan, how much to save, and how and where to invest their money.  

The paper is here.

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