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Report Says Fees Down, Contributions Up in 403(b) Plans

403 (b) Plans

A new report finds some marked improvements among ERISA-covered 403(b) plans.

The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at ERISA 403(b) Plans, 2015,” released by BrightScope and the Investment Company Institute (ICI), found that total plan cost and mutual fund expense ratios have continued trending downward. According to the report, in 2015, the average total plan cost was 0.71% of assets, down from 0.82% in 2009. The study also shows 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% of large ERISA 403(b) plans included TDFs in their core investment lineups, up from 51% in 2009. TDFs represented 19% of plan assets in 2015, nearly three times the level (7%) in 2009.

The report, which analyzes 403(b) plans covered by ERISA that had at least $1 million in plan assets and generally had 100 participants or more (large ERISA 403(b) plans), found that the majority of 403(b) plan sponsors had employer contributions. The DOL Form 5500 Research File data indicate that 81% of large ERISA 403(b) plans had employer contributions in 2015, compared with 74% in 2009. These plans are offered by educational institutions, hospitals and other nonprofit employers.

Among large ERISA 403(b) plans with employer contributions in 2014, 37% had automatic employer contributions, 60% had simple matches, and 16% had both of these features. The remaining 19% had tiered matches and other types of employer contributions.

The average large 403(b) plan subject to ERISA offered 27 “core” investment options in 2015.

Nearly 9 in 10 large ERISA 403(b) plans offered fixed annuities, and more than 8 in 10 offered TDFs.