I usually don’t get worked up about too many things. One former colleague actually referred to me as “Spock.” Sure, if I had a chance to jam with someone like David Gilmore or John Petrucci, or even if my cat did something blog-worthy, you’d probably get a fist bump out of me – maybe even a shout out on Twitter.
So when the fifth annual 403(b) plan survey from the Plan Sponsor Council of America recently came out, I won’t go so far as to say I was giddy. But I was very pleased and – dare I say excited – to see the numbers from the latest survey of 403(b) plans, from participation and savings to employer contributions, generally point in one direction: up.
I think there are many compelling reasons why the survey results are worthy of a shout out:
- The majority of 403(b) organizations contributed to their plans in 2012, with the average contribution nearly 10% higher than 2011.
- The percentage of participants contributing to plans increased to 66.2% in 2012 from 64.3% in 2011. And average deferral rates also inched higher from 5.4% to 5.7%.
- The number of 403(b) plans permitting Roth after-tax contributions continues to grow.
- The number of plans permitting catch-up contributions for those 50 and older continues to increase and more plans (27.7%) are now matching those contributions.
- There’s a renewed focus on education, with an increased use of email, webinars and one-on-one meetings with service providers.
While these numbers are promising, I know there’s always room for improvement, like the limited number of small plans that permit Roth after-tax contributions. Or the fact that higher education institutions on average make 65 funds available for participant contributions, two to three times higher than other industries in the survey.
But to me, these concerns really represent opportunities for financial professionals and TPAs to help 403(b) sponsors continue to modernize their plans – and a reason to meet with them for benchmarking (this flyer can help start the conversation). It also identifies gaps which give financial professionals different reasons to approach prospects as well.
Probably the strongest message I’ve taken away from these survey results is that non-profit plan sponsors and participants alike are displaying a resurgent faith in our nation’s defined contribution retirement system.
And that’s something I can certainly get worked up about.
Friedman is the tax-exempt national practice leader with the Principal Financial Group, an investment management and retirement leader. A noted expert on 403(b) plan design, he has been consulting with tax-exempt organizations for over 20 years and has been in the retirement plan business since 1986. This blog originally ran on The Principal blog. Follow Aaron on Twitter @1AaronFriedman1
Insurance products and plan administrative services are provided by Principal Life Insurance Company. Securities are offered through Princor Financial Services Corporation, 1-800-547-7754, Member SIPC and/or independent broker dealers. Securities sold by a Princor® Registered Representative are offered through Princor. Princor and Principal Life are members of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.
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