Retirement Savings and Participation on the Upswing in 403(b) Plans


Retirement Savings and Participation on the Upswing in 403(b) Plans

New survey from Plan Sponsor Council of America shows sponsorsand participants more committed to saving

DES MOINES, Iowa--(BUSINESS WIRE)-- From participation and savings to employer contributions, the numbers from the latest survey of 403(b) plansgenerally point in one direction: up.

The fifth annual 403(b) plan survey from the Plan Sponsor Council of America (PSCA) shows that both sponsors of 403(b) plans and participants increased their financial commitments to retirement savings in 2012.

Sponsored by the Principal Financial Group®, the benchmarking survey is the only comprehensive one in the industry that uncovers trends in retirement plans sponsored by non-profit organizations and public schools, colleges and universities.

"Sponsors and participants alike are showing they understand the value of saving in 403(b) plans. They are taking actions more in what we see as the right direction to increase overall retirement savings," said Bob Benish, interim president and executive director of PSCA. "The findings validate that the voluntary retirement system is working well."

The majority of 403(b) organizations contributed to their plans in 2012, with the average contribution nearly 10 percent higher than 2011.

The 2013 403(b) Plan Survey which reflects 2012 data, also found:

  • Savings and participation trend upward: The percentage of participants contributing to plans increased to 66.2 percent in 2012 from 64.3 percent in 2011. Average deferral rates also ticked higher to 5.7 percent from 5.4 percent in 2011.

  • More plans with Roth feature: The number of 403(b) plans permittingRoth after-tax contributions continues to grow. In 2012, 23.8 percent of plans allowed Roth, up from 21.7 percent in 2011 and continuing the growth from 10.9 percent in 2007.

  • Catch-up contributions catching up: The number of plans permitting catch-up contributions for those 50 and older continues to increase and more plans (27.7 percent) are now matching those contributions. Seventeen percent of participants made the extra contributions in 2012 compared to 13.4 percent in 2011.

  • Renewed focus on education: 403(b) sponsors increased use of all approaches to education with a greater use of email (70.7 percent in 2012 vs. 65 percent in 2011); webinars (24.8 percent in 2012 vs. 19.9 percent in 2011) and one-on-one meetings with service providers (54.2 percent in 2012 vs. 50.6 percent in 2011).

  • Low use of loans and withdrawals: Only 11.6 percent of 403(b) participants have outstanding loans and the dollar amount represents only 1 percent of plan assets—about half the amount reported in PSCA's 2012 survey on 401(k) plans. The number of participants taking a hardship withdrawal from 403(b) plans continued to decline from 1.6 percent in 2011 to only 1.2 percent in 2012.

"The 403(b) loan and withdrawal numbers prove that participants are not abusing features that permit limited access to plan assets," said Benish. "Those features are important in attracting participation but clearly employees are exercising caution in how often they are used."

Opportunities for financial professionals and third party administrators
While 403(b) plans continue to evolve, the data points to several areas for improvement, which can be opportunities for financial professionals and TPAs:

  • Only 14.9 percent of small plans permit Roth after-tax contributions compared to 42.9 percent of larger organizations.

  • Higher education institutions on average make 65 funds available for participant contributions, two to three times higher than other industries in the survey.

"The data indicates there are opportunities to help 403(b) sponsors continue to modernize their plans," said Aaron Friedman, national non-profit practice leader, The Principal®. "One of the biggest opportunities may lie with higher education. Nearly half (47.9 percent) of these institutions still use more than one provider and for 40 percent of them, it's been at least five years since their last RFP."

Friedman continued, "The 403(b) Survey provides a reason to meet with existing clients for benchmarking. It also helps identify gaps which create reasons for financial professionals to approach prospects as well."

For more news and insights from The Principal, connect with us on Twitter at

About the Plan Sponsor Council of America
The Plan Sponsor Council of America (PSCA), a national, non-profit association of 1,200 companies and their six million employees, advocates increased retirement security through defined contribution programs to federal policymakers. PSCA makes practical assistance available to its members with plan design, administration, investment, compliance, and communication materials. 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, and non-profit organizations.

About the Principal Financial Group
The Principal Financial Group® (The Principal®)1 is a global investment management leader offering retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500®, the Principal Financial Group has $456.1 billion in assets under management2 and serves some 19.1 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit

Bob Benish and PSCA are not an affiliate of any company of the Principal Financial Group.
© 2013 Principal Financial Services, Inc.

1 "The Principal Financial Group" and "The Principal" are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
2 As of March 31, 2013.

Principal Financial Group
Terri Hale, 515-283-8858
Robert Benish, 312-419-1863

KEYWORDS: United States North America Iowa


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