403(b) Plan Sponsors Need to Bring Their “A” Game

While I love college football, I’m not a pro football fanatic by any means. I do enjoy a few good pro games each season – and am so glad those painful pre-season games are behind us! Yet I’m always intrigued by how the coach will play their star players for maybe the first quarter and then usher in a gaggle of no-name back-ups to finish it out. It makes for must-snore TV.

I know it’s for good reason – they want to keep their starters healthy, evaluate their second and third stringers, etc. But I wonder if they don’t go with their best line-up, how will they really know what level of talent they’ll have on the field once the real season starts?

I liken this to what I learned from the recent results from surveys by the Plan Sponsor Council of America. I realized that the 401(k) plans were largely outscoring 403(b) plans in some key plan features. See the numbers in the table below:

Plan Feature 403(b) Results 401(k) Results
Auto enrollment 14.6% 45.9%
Auto escalate 16.9% 39%
Roth deferral feature available in plan 23.8% 49.0%
Participants who make Roth deferrals 8.8% 17.4%

What I concluded is, like the coaches who are “holding back” their best players for the regular season, maybe 403(b) plan sponsors are hesitating to include essential key features in the line-up that could make their plan more robust over time. I’m not sure what they’re waiting for.

For example, for the auto enroll/auto escalate features, plan sponsors of non-profits don’t seem to want to make the decision for participants, and are concerned with additional administrative burden. Financial professionals can help point out that the opt-out provisions are clearly communicated to participants, so nobody has to do anything, but it’s a great strategy to help overcome inertia.

Additionally, for the Roth deferral, different participants may have different tax preferences, so why not offer both? When you give participants choices, what is there to lose?

To me, these PSCA results serve as somewhat of a pre-season poll to determine whether you will have a winning retirement plan. And it’s an opportunity for advisors to help 403(b) plan sponsors step up their game for the upcoming enrollment season.

Lots of football jargon there, I know – but it helps me get my 403(b) plan game face on.


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While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

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  • Silvia Frank

    great comments Aaron!! From a non profit savings plan administrative point of view, the slow adoption of auto enroll ties directly to expense. Also, the reason the Roth has challenges is due to universal availability regulations. For example, my organization is on multiple payroll systems and not all can ‘handle’ a Roth deduction. In addition, the implementation process of this additional deduction from an IS perspective is challenging when dealing with multiple systems and system support resources. I have to admit that these challenges do not prevent me from presenting these ideas every couple of years……thanks !!

    • Aaron Friedman, National Practice Leader – Tax-Exempt, the Principal Financial Group, Princor Registered Representative

      Thank you for the insight, Silvia. I appreciate the comment, and especially the perspective from a plan sponsor.