403(b) Plan Sponsors Rising to the Challenge

By SHRM Online staff May 30, 2011

In the wake of sweeping regulatory changes from the U.S. Department of Labor, 403(b) retirement plan sponsors are in the final stages of compliance—while adapting to participant needs and coping with volatile investment markets, according to the Profit Sharing/401(k) Council of America (PSCA), a national nonprofit association.

PSCA's 2011 403(b) Plan Survey,conducted with the Principal Financial Group in March 2011, reveals that 403(b) plans are making use of:

Roth contributions. 16.9 percent of 403(b) plan sponsors surveyed permitted Roth after-tax contributions.

Online communication. While 63.1 percent of respondents still use on-site, one-on-one meetings to educate participants, a growing number of respondents use electronic communication methods (e-mail: 59.5 percent; intranet/Internet sites: 50.2 percent; webinars: 15.1 percent).

Help from investment advisors. More than 45 percent of respondents use an independent investment advisor to help with fiduciary responsibilities.

Target-date funds. Just over 69 percent of plans offer a target-date fund as an investment option.

Form 5500 assistance. Just over 77 percent of respondents use an auditor, recordkeeper or aggregator to prepare their Form 5500.

Investment advice. 21.6 percent of organizations offer investment advice to participants. The most common type of advice offered is one-on-one counseling in person (88.5 percent of those that offer investment advice).

Investment options. Plans offer an average of 26 funds for organization contributions and an average of 28 funds for participant contributions.

Hardship withdrawals. 74.7 percent of plans allow participants to take permanent hardship withdrawals; 1.6 percent of plan participants took a hardship withdrawal in 2010 when permitted.

Loans. 72.1 percent of plans allow participants to borrow against their plan assets; 49.5 percent allow loans for any reason; 22.6 percent allow loans only in hardship situations.

“This year’s survey proves that 403(b) plan sponsors are still working hard to comply with the new regulations,” said PSCA President David Wray. “Although the rate of change has slowed since our 2009 survey, there are still significant adjustments under way as plan sponsors respond to the needs of their participants and their plans.”

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