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How 403(b)s Are Faring: A Look at 2 Sectors

By John Iekel • December 11, 2017 • 0 Comments
How are 403(b)s doing? What portion of the retirement plan universe do they occupy? How are employers responding to them? Two recent studies offer a look at how sizable and significant a role they have.

In “Live + Learn Well, Live + Learn Wealthy: 2017 Retirement Plan Trends for Institutions of Higher Education,” Transamerica says that it found that the decline in the number of employers offering 403(b)s is precipitous, even in a sector of the economy in which one may expect 403(b)s to be dominant.

Transamerica says that the drop in the number of institutions of higher learning that offer 403(b)s is accelerating:

Year        Institutions of Higher Learning
      Offering 403(b)s
      Change from Previous Year
      (Percentage Points)
 2014                      75%                       --
 2015                      64%                   -11%
 2016                      49%                   -15%

Some institutions of higher learning are filling the void with Roth 403(b)s. Of the employers they studied, 16% have done so in the last 12-24 months, and another 26% plan to do so in the next year. In addition, Transamerica’s researchers found that the overall trend of proliferation of 401(k) plans also holds true for the institutions of higher learning — and that is happening at the expense of 403(b)s.

Taking Their Temperature

It’s common for the assumption to be that 403(b)s participants are employed educational institutions or non-profits, but they also may hail from some of the employers in the healthcare industry. In fact, more of them do so than one may imagine, according to Transamerica in its study, “The Path to Wealth Starts With Health: 2017 Retirement Plan Trends in Today’s Healthcare Market.” Transamerica’s close look at the retirement benefits employers in that sector are offering reports that at nearly two-thirds of healthcare organizations, more plan participants are enrolled in a 403(b) than any other kind of defined contribution plan.

But that tally may not last long. Transamerica says that “gradually,” 401(k) plans are “gaining ground” in that sector, as they are in other sectors. Further, fewer healthcare employers offered 403(b)s in 2016 than did so the year before. But while that’s true for traditional 403(b)s, Roth 403(b)s are growing in popularity in this sector. In 2014, 21% did so, and in 2015, one-third for so. That proportion held roughly steady in 2016.

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