Contributions to 403(b) plans rising

While some reports indicate that for-profit organizations are struggling to make retirement plan contributions on behalf of employees, their nonprofit counterparts are doing rather well, a new survey says. The Plan Sponsor Council of America and the Principal Financial Group say that both participation and contributions to 403(b) plans were up in 2012.

The PSCA says its survey, now in its fifth year, is the only comprehensive one to cover retirement trends for public schools and other not-for-profit firms. Most 403(b) organizations contributed to their plans in 2012, the PSCA reports, with the average contribution nearly 10% higher than in 2011.

Some 66.2% of participants contributed to their plans in 2012, according to the survey, up 1.9% from 2011. Deferral rates also rose, from 5.4% in 2011 to 5.7% in 2012. The number of plans offering catch-up contributions for those 50 and older continues to rise, and 17% of participants took advantage of them in 2012, compared to 13.4% in 2011.

“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,” says Bob Benish, interim president and executive director of PSCA. “The findings validate that the voluntary retirement system is working well.”

403(b) sponsors increased their use of all forms of workforce education on retirement plans last year. The survey reports rises in email (up 5.7%), webinars (up 4.9%) and face-to-face meetings (up 3.6%) in 2012.

In addition, only 1% of plan assets are part of outstanding loans from 403(b) plans – approximately half of the amount from the 2011 survey. The number of participants taking hardship withdrawals continued to decline, from 1.6% in 2011 to 1.2% last year.

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