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How 403(b)s Are Faring in the Higher Ed and Health Care Sectors

How are 403(b)s doing? What portion of the retirement plan universe do they occupy? How are employers responding to them? Two recent studies from Transamerica offer a look at the size and significance of their role in health care and higher education.

Health Care

It’s common for the assumption to be that 403(b) participants are employed at educational institutions or nonprofits, but they also may hail from some of the employers in the health care industry. In fact, more of them do so than you might think, according to a Transamerica study, “The Path to Wealth Starts With Health: 2017 Retirement Plan Trends in Today’s Healthcare Market.” Transamerica’s look at the retirement benefits offered in that sector finds that at nearly two-thirds of health care organizations, more plan participants are enrolled in a 403(b) than any other kind of DC plan.

But that tally may not last long. Transamerica says that “gradually,” 401(k) plans are “gaining ground” in that sector, as they are in other sectors. Furthermore, fewer health care employers offered 403(b)s in 2016 than did so the year before. But while that’s true for traditional 403(b)s, Roth 403(b)s are growing in popularity in this sector. In 2014, 21% did so, and in 2015, one-third for so. That proportion held roughly steady in 2016.

Higher Education

In “Live + Learn Well, Live + Learn Wealthy: 2017 Retirement Plan Trends for Institutions of Higher Education,” Transamerica says that it found that the decline in the number of employers offering 403(b)s is precipitous, even in a sector of the economy in which one would expect 403(b)s to be dominant.

Transamerica says that the drop in the number of institutions of higher learning that offer 403(b)s is accelerating:
























YearInstitutions of Higher Learning Offering 403(b)sPercentage Change From Previous Year
201475%              --
201564%-11%
201649%-15%

 

Some institutions of higher learning are filling the void with Roth 403(b)s. Of the employers they studied, 16% have done so in the last 12-24 months, and another 26% plan to do so in the next year. In addition, Transamerica’s researchers found that the overall trend of proliferation of 401(k) plans also holds true for the institutions of higher learning — and that is happening at the expense of 403(b)s.

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