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Most 403(b) Plans, Participants Weather the COVID Storm

403(b) Plans

Sometimes viewed as laggards in plan design, nonprofit employers are leading the way in at least two key aspects.

According to the Plan Sponsor Council of America’s annual 403(b) Plan Survey, more than half (53%) of 403(b) plans reported offering annuities as a distribution option that would provide guaranteed income in retirement. That’s well above 401(k) plans, where only 17% currently provide that option.

Additionally, nonprofits are also ahead on offering access to environmental, social, and governance (ESG)-focused investment options. Among asset classes available to participants, 38 % of those surveyed offer ESG. That compares with an average of just 3% in 401(k) plans. 

In fact, nonprofit workers participated in 403(b) retirement plans at the highest level since tracking began in 2008—77% in 2020, up from 77% in 2019 and 72% in 2018, according to the survey, sponsored by Principal Financial Group®, which surveyed nearly 400 nonprofit retirement plan sponsors on outcomes during 2020. The increase in plan participation coincided with a continued emphasis by nonprofits on automatic enrollment in 403(b) plans. Nearly 30% of organizations said they use the feature, a 50% increase from just 5 years ago.

The survey also showed an overall increase in focus by nonprofit employers on retirement benefits and outcomes. 

More than half (56%) of plans with automatic enrollment now also automatically escalate the default deferral percentage over time.

Half (49%) of 403(b) plans now offer Roth after-tax contributions, up from 47% in 2019.

The availability of investment advice for participants increased to 42% in 2020 from 37% the previous year.

Plan sponsors are monitoring investment results on a more frequent basis, with 40% noting quarterly monitoring versus 38% in 2019. 

Hard Hit?

It’s clear that COVID-19 hit nonprofit organizations particularly hard last year. Some nonprofits (12%) in the hardest hit sectors reduced or suspended plan contributions, reducing the overall average from 6% of pay in 2019 to 5% in 2020. Likewise, workers’ saving rates slipped to an average of 6%, down from a peak of 7% in 2019. 

On the other hand, while there were increases in plan loans (14% in 2020 versus 12% in 2019) and hardship requests (1.3% from 0.8% the year prior), the increases were modest in view of the pandemic’s impact and the expanded access afforded by the CARES Act. 

PSCA’s 2021 403(b) Plan Survey of nearly 400 non-profit organizations across the U.S. is the only independent 403(b) research report that delivers actionable data on trends among plan sponsors in the nonprofit sector. Additional survey results can be found at