Employee retirement readiness, financial wellness and regulatory compliance are the top three priorities of non-profit organizations with 403(b) retirement plans heading into 2020, according to a new Plan Sponsor Council of America (PSCA) survey, sponsored by Principal Financial Group.
“At a time of increased legislative activity and high-visibility litigation targeting some 403(b) plans, plan sponsors have responded with a renewed commitment to compliance and an enhanced focus on the role of the fiduciary,” said Hattie Greenan, director of research and communications at PSCA. “At the same time, it is noteworthy that non-profit employers are continuing to focus on improving participant outcomes by helping them more effectively take advantage of their workplace retirement plan.”
The PSCA report surveyed nearly 300 403(b) plan sponsors to show how these organizations approach retirement plan management. In addition to retirement readiness, sponsors are adapting to recent changes in the regulatory environment.
“Plan sponsors can play a powerful role in helping their employees prepare for lifelong financial security,” said Luke Vandermillen, vice president of retirement and income solutions at Principal. “It’s encouraging to see employers increasingly offer plan features, educational resources and access to financial advisors to equip their employees to save for their future while managing the complexities of debt in the year to come.”
2020 403(b) plan sponsor priorities
Top priorities (by percentage)
- Keeping the plan in compliance and reducing fiduciary liability (54%)
- Increasing participation rates (43%)
- Increasing deferral rates (42%)
- Adding financial wellness (32%)
- Reducing plan cost (24%)
Most anticipated plan changes (by percentage)
- Changing the number of investment options (14%)
- Changing/adding automatic enrollment (10%)
- Adding Roth (9%)
- Changing contribution formula (6%)
- Adding an investment policy statement (6%)
Report highlights
- More than half (54%) of 403(b) sponsors are focused on compliance and reduction of fiduciary liability. They reported plans to increase internal oversight processes, seek outside counsel and/or engage in research and education to stay current on retirement plan regulations and responsibilities—ranging from participant communication to overseeing service providers and monitoring fees.
- Plan sponsors are committed to increasing participation rates (43%) and deferral rates (42%). More than three-fourths (78%) of respondents indicated that they will address these areas by increasing education and 48% will provide access to a financial advisor. For years, the highest priority of plan sponsors was to increase the number of employees in the plan. This continues to be one of the highest priorities for plan sponsors in 2020, with one-third (30%) making plan changes to increase retirement readiness.
- Plan sponsors continue to focus on financial wellness as a priority (32%). Thirty-two percent of plan sponsors—including 58% of organizations with more than 1,000 plan participants—have prioritized adding financial wellness tools to their plans in 2020. They expect to provide employees with tools related to budgeting (76%), debt management (68%), emergency funds (56%) and student loan debt (51%).
- Cybersecurity expected to increase in importance. While only 5% of respondents cited cybersecurity as a priority for 2020, this seems likely to increase in the months ahead amidst growing concerns about identify theft and security of plan balances.
The full report is available for download at https://www.psca.org/2019survey_403bpriorities.