New Survey Fills the Gap in 403(b) Benchmarking Data
CHICAGO, IL, December 18, 2008 -- The Profit Sharing/401k Council of America (PSCA), a national non-profit association committed to retirement savings through employee-sponsored defined contribution programs, has released it 2008 403(b) Plan Survey. This new survey is the first of its kind, providing comprehensive information on 403(b) plan practices.
PSCA conducted this survey to help fill the gap in available benchmarking data for 403(b) plan sponsors. Not-for-profit organizations are facing increased administrative responsibilities as a result of regulations from the Treasury Department. 41 percent of respondents stated that they anticipate making changes to their plans as a result of these new regulations. The new regulations bring some rules for 403(b) plans in line with requirements for 401k and 457(b) plans but there was little available data for 403(b) plan sponsors to use to evaluate their plans. With the release of this survey data, PSCA is providing these plan sponsors with information they need benchmarking their plans.
PSCA's 2008 403(b) Plan Survey reports on the 2007 plan-year experience of 385 not-for-profit organizations. The survey contains more than 60 tables of data on important topics such as participation rates, organization contributions, asset investment, vesting, loans, Roth features, automatic enrollment, the impact of new 403(b) regulations on plan design, and more. Data is broken out by plan size and often by industry type. The survey was sponsored by The Principal Financial Group.
Following are highlights of the survey results:
Plan Agreement Types
25.2 percent of respondents have an Annuity Group Custodial Agreement (GCA) and 19.5 percent of plans have a Non-Annuity GCA. Plans with large assets ($100 million or more) tend to have non-annuity GCAs (60.0 percent of plans), while plans with the lowest plan assets ($2 million or less) tend to have annuity GCA’s (28.2 percent of plans) or non-annuity Individual Custodial Agreements (ICAs) (14.1 percent of plans).
Eligible Employees
83.5 percent of employees at respondent organizations are eligible to participate in their organization’s plan. Large organizations (more than 1,000 participants) have the highest percent of eligible employees (94.1 percent).
Organization Contributions
89.4 percent of organizations contribute to the plan. The most common formula used is a stated employer match only (26.8 percent of plans), followed by a fixed match only (14.3 percent of plans), and a guaranteed percentage of participant’s pay only (13.8 percent of plans). For organizations that match participants’ contributions, the most common matching formula is dollar for dollar (45.4 percent of plans) on the first 3 percent of pay (15.3 percent of plans).
Participant Contributions
99.2 percent of plans permit participant contributions. Pre-tax contributions are permitted in 84.7 percent of plans while Roth and 401(m) after-tax contributions are permitted in 14.6 percent of plans.
Participation
The average participation rate (percentage of eligible employees with a balance in the plan) is 75.8 percent. Plans with 50-199 participants had the highest participation rate (81.0 percent) and plans with 1,000 or more participants had the lowest (63.4 percent).
Roth Feature
10.9 percent of plans permit Roth after-tax contributions and 8.9 percent of participants made Roth contributions when offered the opportunity. According to PSCA’s 51st Annual Survey of Profit Sharing and 401k Plans, 30.3 percent of plans permit Roth contributions and 12.6 percent of eligible participants made Roth contributions.
Catch-up Contributions
Catch-up contributions for participants age 50 and over are permitted in 90.8 percent of plans. 17.2 percent of eligible participants made catch-up contributions. Of organizations that permit catch-up contributions, 21.6 percent match them.
Investment Options
Plans offer an average of 20 funds for organization contributions and an average of 22 funds for participant contributions. 30.5 percent of plans offer 26 or more funds for participant contributions.
Investment Policy Statements
46.3 percent of respondents have an investment policy statement. 34.2 percent of plans are unsure if their plan has such a statement. According to PSCA’s 51st Annual Survey of Profit Sharing and 401k Plans, 83.5 percent of plans currently have an investment policy statement.
Automatic Enrollment
16.5 percent of plans have an automatic enrollment feature. Automatic enrollment is more common in large plans (25.6 percent) than in small plans (11.1 percent). The average default deferral percentage in plans with automatic enrollment is 2.8 percent of pay.
Loans
79.3 percent of plans allow participants to borrow against their plan assets. 47.0 percent allow loans for any reason while 32.3 percent allow loans only in hardship situations. 68.5 percent of plans specify a minimum loan amount. The most common minimum is between $500 and $1,000, present in 54.7 percent of plans.
Investment Advice
55.3 percent of organizations offer investment advice to participants. The most common type of advice offered is one-on-one counseling in person (80.7 percent of organizations). According to PSCA’s 51st Annual Survey of Profit Sharing and 401k Plans, 47.9 percent of 401k plans offer investment advice; 61.2 percent of plans offer one-on-one counseling.
Vesting
58.1 percent of plans provide immediate vesting for non-matching contributions and 48.3 percent of plans provide immediate vesting for matching contributions. Among plans that do not provide immediate vesting, graduated vesting is the most common arrangement for matching contributions and cliff vesting is the most common arrangement for non-matching contributions.
Preparation of the 5500
In 47.3 percent of plans, the 5500 is filed by the recordkeeper. 28.2 percent of organizations prepare the 5500 themselves.
About the Profit Sharing/401k Council of America
The Profit Sharing/401k Council of America (PSCA), a national non-profit association of 1,200 companies and their 6 million employees, advocates increased retirement security through profit sharing, 401k and related defined contribution programs to federal policymakers and makes practical assistance with profit sharing and 401k plan design, administration, investment, compliance and communication available to its members. PSCA, established in 1947, is based on the principle that “defined contribution partnership in the workplace fits today’s reality.” PSCA's services are tailored to meet the needs of both large and small companies with members ranging in size from Fortune 100 firms to small, entrepreneurial businesses.
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