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Auto Features Gaining Ground Among 403(b)s

By NTSA Net Staff • August 25, 2017 • 0 Comments
Automatic features continue to take hold among 403(b) plans, the Plan Sponsor Council of America (PSCA) found in a recent study.

PSCA’s annual 403(b) survey reports that more plans are offering auto enrollment, and that auto escalation is becoming more widespread as well.

“Over the past several years, the PSCA survey has shown a steady increase in the use of automation and plan design enhancements. Automation is leading to greater plan enrollment, deferral rate escalation and employee contributions,” said Aaron Friedman, national practice leader, Principal® in a PSCA press release. The incidence of 403(b) plans employing auto enrollment has been growing steadily:

Year       403(b) Plans with Auto Enrollment
 2017 21%
 2016 19%
 2014 16.2%

Auto escalation and deferral rates have grown as well, the PSCA found. More than half of plans with auto enrollment also have auto escalation. And the percentage of plans with a default deferral rate of more than 3% has increased from 21.6% to 34%.

There are changes in the default investment options for participants who enroll but do not choose an option, the report says. Use of money market funds has dropped to slightly less than 10% of plans; however, for approximately two-thirds of employers, target date funds are the default investment option of choice.

And employers offering 403(b)s have grown slightly more generous in the last two years, says the study: the average employer contributions have grown from 4.7% in 2015 to 5% this year.

The PSCA received responses in its ninth annual survey from 608 organizations that sponsor 403(b) plans.

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