Our nonprofit brethren are doing just fine.
Joint research from BrightScope and the Investment Company Institute shows high employer contribution rates and 27 “core” investment options in the average large 4013b plan.
Offered by educational institutions, hospitals, and other nonprofit employers, 403b plans allow employees to make tax-deferred contributions, often include employer contributions, and offer a wide variety of investments.
“This report suggests that nonprofit employers sponsoring 403b plans recognize the importance of plan design and include features that will help attract and retain qualified workers,” Sarah Holden, ICI senior director of retirement and investor research, said in a statement. “Plan design features, which drive engagement with retirement saving through 403b plans, include automatic enrollment, the structure of employer contributions, active and indexed investment options, and the flexibility of a loan feature.
With these multiple features, she adds, employers are able to customize the design of their 403b plans to suit their workforces.”
The research found that in 2015, nearly nine in 10 large ERISA 403b plans offered fixed annuities and more than eight in 10 offered target-date funds.
Other core investments options included non–target date balanced funds, international bond funds, and money funds.
The study also found that the majority of 403b plan sponsors had employer contributions.
The DOL Form 5500 Research File data indicate that 81 percent of large ERISA 403b plans had employer contributions in 2015, up from 74 percent in 2009.
Total plan cost and mutual fund expense ratios have continued trending downward.
The BrightScope measure of total ERISA 403(b) plan costs—which includes administrative, advice, and other fees from Form 5500 filings, as well as asset-based investment management fees—has decreased since 2009.
In 2015, the average total plan cost was 0.71 percent of assets, down from 0.82 percent in 2009.
The study also showed that mutual fund expense ratios in large ERISA 403(b) plans tended to decrease during this time as well.
Target-date funds have become more common in large ERISA 403(b) plans.
In 2015, 81 percent of large ERISA 403(b) plans included target date funds in their core investment lineups, up from 51 percent in 2009. Target date funds represented 19 percent of plan assets in 2015, up from about 7 percent in 2009.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
