Larger 403(b) Plan Sponsors More Likely To Use An Advisor

By Cyril Tuohy

InsuranceNewsNet

Nearly one out of two (46 percent) 403(b) retirement plan sponsors retained an independent investment advisor to assist with fiduciary responsibility last year. The larger the plan, the more likely it was to have an advisor, a new survey has found.

The survey, released annually by the Plan Sponsor Council of America (PSCA), found that while 27.2 percent of plans with between 1 and 49 participants retained an advisor, 60.5 percent of plans with more than 1,000 participants did so.

The PSCA’s 2013 403(b) Plan Survey, sponsored by The Principal Financial Group, also found that only 31.6 percent of K-12 education plans retain an independent investment advisor compared with 75.6 percent of hospitals and hospital systems that retain one.

The 403(b) plan survey of 573 nonprofit organizations that sponsor the plans tracks retirement plan participation of employees in the nonprofit sector. Retirement plans sponsored by for-profit companies are tracked in a different survey.

“The data indicates there are opportunities to help 403(b) sponsors continue to modernize their plans,” Aaron Friedman, national nonprofit practice leader with The Principal Financial Group, said in a news release. “One of the biggest opportunities may lie with higher education.“

Nearly half of the higher education institutions responding to the survey still use more than one plan provider, he said.

The survey also found that when investment advice is offered, 22.8 percent of all 403(b) plan sponsors use a registered investment advisor, and 56.1 percent of plan sponsors use a financial advisor affiliated with a plan provider.

Only 7.6 percent of 403(b) plan sponsors use investment advisors as the primary plan record keeper, while 32.2 percent of plans use a third-party administrator. Insurance companies come in third with 26.1 percent of plan sponsors using them as the primary plan record keeper, the survey found.

In addition, the survey found that 16 percent of plan sponsors who made changes to their plans added or changed providers, advisors or consultants.

The percentage of participants contributing to plans increased to 66.2 percent last year, up nearly two percentage points from 2011. Average deferral rates increased to 5.7 percent in 2012, up slightly from 5.4 percent in 2011, the survey also found.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].

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