PSCA Survey Finds 403(b) Sponsors Need More Information on Their Plan Design, Including How Plan Expenses Are Paid

New Plan Sponsor Council of America data also highlights low awareness of policy statements and fee levelization

Nearly one-third (30.9 percent) of 403(b) plan sponsors are unsure as to whether they use revenue sharing to pay plan expenses, according to the latest 403(b) Snapshot Survey from the Plan Sponsor Council of America (PSCA) and sponsored by Principal Financial Group®. Among the smallest plan sponsors – those with less than 50 participants – this climbs to 47.4 percent.

“Our annual survey shows that 403(b) plans have made significant improvements in plan administration,” said Hattie Greenan, Director of Research and Communications, PSCA. “This snapshot survey highlights how additional focus evaluating fees and expenses as well as implementing a prudent, documented process might help to mitigate the risks plan fiduciaries face.”

Formal Fee Policy Statement Adoption

The PSCA annual survey also found low use of a formal fee policy statement to monitor the reasonableness of plan fees and services, with less than one-third (31.9 percent) of respondents indicating their use. One-fifth (21 percent) are not aware of what a fee policy statement is, according to the survey.

Focus on Fee Levelization

Seventy-six percent of survey respondents indicated they are unfamiliar or only somewhat familiar with methods to level plan administrative fees among participants. Importantly, awareness of fee levelization decreases with plan size: 55.4 percent of plan sponsors with more than 1,000 participants indicated they are familiar with the practice, compared with only 6.4 percent of those with less than 50 participants.

“We are hearing a lot of buzz around equalizing or levelizing retirement plan administrative fees, especially as awareness of fiduciary responsibility heightens,” said Aaron Friedman, non-profit national practice leader at Principal®. “But this survey tells us there’s still a significant opportunity for plan sponsors – especially smaller organizations – to work with advisors that can help them better understand revenue sharing and look into fee levelization.”

Greater understanding of 403(b) plan design allows sponsors and fiduciaries to ensure regulatory compliance and fulfillment of their fiduciary responsibilities for the plan and its participants.

“In evaluating plan design, plan sponsors and fiduciaries should also empower participants with the resources necessary to make informed savings and investment decisions,” said Friedman.

PSCA’s 2017 403(b) Snapshot Survey reflects responses from 250 not-for-profit organizations that currently sponsor a 403(b) plan. The survey was conducted online in October/November 2017. For more research, analysis and insights from Principal, visit the Principal Knowledge Center and connect with us on Twitter.

About the Plan Sponsor Council of America

The Plan Sponsor Council of America (PSCA) is a diverse, collaborative community of employee benefit plan sponsors, working together on behalf of millions of employees to solve real problems, create positive change and expand on the success of the employer-sponsored retirement system. With members representing employers of all sizes, we offer a forum for comprehensive dialogue. By sharing our collective knowledge and experience as plan sponsors, PSCA also serves as a resource to policymakers, the media and other stakeholders as part of our commitment to improving retirement security for millions of Americans. For more information, visit www.psca.org.

About Principal®

Principal helps people and companies around the world build, protect and advance their financial well-being through retirement, insurance and asset management solutions that fit their lives. Our employees are passionate about helping clients of all income and portfolio sizes achieve their goals – offering innovative ideas, investment expertise and real-life solutions to make financial progress possible. To find out more, visit us at principal.com.

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©2017 Principal Financial Services, Inc.

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PSCAHattie Greenan, [e-mail] Financial GroupLonnetta Ragland, [e-mail]