Where 403(b)s Are Ahead of the Game

March 1, 2011 (PLANSPONSOR.com) – Along with the new Internal Revenue Service regulations came some “bad rap” about how far behind 403(b)s were in sponsor and participant engagement, but PLANSPONSOR’s 2011 Industry Report: 403(b) Plans reveals areas in which 403(b) plans shine.

PLANSPONSOR’s 2010 DC Survey found that compared to the overall defined contribution market, 403(b)s have a relatively high incidence of use of a written Investment Policy Statement (IPS), use of certain investment products, and use of advisers.   

The survey found 63.4% of 403(b)s had a written IPS compared to 56.1% of DC plans overall. In addition, only 30.5% of 403(b) plan respondents indicated they have no investment committee for the plan versus 36.2% of respondents overall.  

Nearly a third of 403(b) respondents said they review the investment options of their plan annually, and 31.3% do so quarterly. The majority of 403(b) sponsors (64.2%) review plan costs/fees annually, and 11.2% reported they do so every one to two years.  

Overall, 22.7% of 403(b) sponsors offer an in-plan retirement income product to employees, compared to only 11.1% of DC plan sponsors overall. 403(b) plans have a higher use of target-date funds than the overall industry as well (72.6% vs. 60.5%), and the same is true for so-called “socially responsible” investment offerings (33% vs. 9.4%).  

More than two-thirds (67.3%) of 403(b) respondents indicated their plans use the services of a financial adviser, compared to 62.4% of DC plans overall. In addition, only 17.3% of 403(b) sponsors said they do not offer advice to participants versus 24.1% of the overall market.  

Within the PLANSPONSOR 2010 DC Survey, 419 respondents are from 403(b) plans. Of these 403(b)  plan respondents, 186 (44.4%) are “Micro” plans (under $5 million in DC assets), 130 (31.0%) are “Small” plans ($5-$49 million), 53 (12.6%) are “Mid” plans ($50-$199 million), 45 (10.7%) are “Large” plans ($200 million-$1 billion), and 5 (1.2%) are “Mega” plans (over $1 billion).   

The 2011 Industry Reports provides insight on plan designs and administration for a variety of sponsor and plan types. To purchase a report, contact Michelle Judkins at mjudkins@assetinternational.com.