There’s been a shift in emphasis for retirement plans in the non-profit sector.
For the first time ever, organizations that provide 403(b) plans reported that retirement planning, rather than increasing participation, was their top focus for employee education, according to the 12th annual 403(b) Plan Survey from the Plan Sponsor Council of America (PSCA), sponsored by Principal Financial Group.
‘Primary’ Colors?
More than a third of organizations now state that their primary purpose for providing plan-related education is retirement planning (34.8%), outpacing the previous years’ top goal of increasing participation. While this was the first time the primary goal has been anything other than to increase participation, that objective remained a high priority (33.0%). Increasing appreciation for the plan—perhaps reflecting previous emphasis on that aspect in communications—came in a distant third, at 12.2%.
The most common ways employers educated participants was through email (90.4%), Intranet/Internet sites (48.7%), enrollment kits (40.9%), and providing one-on-one assistance with a financial professional (40.0%).
And, while those plan sponsors hadn’t yet contemplated the work from home environment wrought by the COVID-19 pandemic, 30% of organizations initiated a cybersecurity awareness campaign related to retirement plans, and a third distributed email alerts about specific security issues in 2019.
Participation, Contributions Climb
As has been the case with 401(k) plans, 403(b) programs saw increases in both participation and plan sponsor contribution rates. More participants contributed to their plan this year (76.6%, up from 72.0% in the prior year’s survey), while plan sponsor contributions climbed to 6.3% this year, up from 5.5%. Significantly, over the last two years, employer contributions have increased 34%.
The survey also found an increase in participant contributions, which now average 7.2% of pay. The increase in participant contribution rates is helped in part by higher default deferral rates and automatic escalation of contribution rates. Nearly half (45.1%) of plans now use a default deferral rate higher than the traditional level of 3%, up from 37.7% last year. More than half (51.1%) of plans with automatic enrollment automatically escalate that default deferral percentage over time.
PSCA’s 2020 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 non-profit sector. This year the survey was conducted while many non-profits and their employees faced unprecedented hardships from the health and economic impacts of COVID-19.
For more information on the PSCA 403(b) Survey, visit https://www.psca.org/research/403b/2020AR.
