403(b) Plan Survey Reveals Lack of Clarity on Fiduciary Role

New survey from the Plan Sponsor Council of America explores
retirement plan trends among non-profit organizations

DES MOINES, Iowa–(BUSINESS WIRE)–Of non-profit organizations that sponsor 403(b) retirement plans, only
60 percent are reviewing and evaluating the investment options in their
plans, according to the latest 403(b)
Snapshot Survey
from the Plan
Sponsor Council of America
(PSCA) and sponsored by the Principal
Financial Group
®. That number falls to just 40 percent for sponsors
of small plans (1-49 participants).

However, 64 percent of large plans are receiving assistance from
investment consultants. This percentage drops off sharply for small
plans, with just 18 percent engaging a consultant to help review and
evaluate plan investments. Additionally, more than 30 percent of
respondents state their plan service provider reviews their mutual funds
and nearly 9 percent answer that no one does. That total jumps to 16
percent among small plans.

“More than 90 percent of organizations indicate someone is reviewing and
evaluating funds, and 86 percent are using some type of benchmark in
evaluating funds. That’s great news,” said Hattie Greenan, PSCA’s
director of research and communications. “However, small not-for-profits
look like they could use some support, with fewer than half evaluating
funds themselves and very few using an investment consultant.”

The survey also found a high percentage of plans not conducting RFPs to
help ensure their plan fees are reasonable. Forty-two percent of plans
do not conduct periodic RFPs. Among the smallest plans, the percentage
increases to 64 percent.

“This data point, along with many others in the survey, illustrates how
small plans are underserved by financial advisors and could benefit
greatly from their expertise,” said Aaron Friedman, national tax-exempt
practice leader at The Principal®. “Small organizations often don’t have
dedicated HR personnel and could use the help from outside resources to
assist them with their fiduciary responsibilities.”

Investment Benchmarking
A majority of plans (86 percent)
indicate they benchmark their funds. The most popular elements used in
benchmarking include:

  • Performance (84 percent)
  • Fees (69 percent)
  • Risk (64 percent)

More than 40 percent of plans have not replaced any funds in the last
two years, including two-thirds of small organizations.

Investment Education
According to the survey, plan sponsors
rely heavily on their providers to deliver investment information to
participants. More than half of sponsors indicate their plan provider
helps participants make investment decisions, and 30 percent use an
investment consultant to do so.

“It’s clear there’s a huge reliance on plan providers to offer resources
for participants to determine how much to save and how to invest,”
Friedman said. “And it’s encouraging to see that more than half of plan
sponsors make a financial planner available to participants.”

2015 403(b) Snapshot Survey
reflects responses from 426
not-for-profit organizations that currently sponsor a 403(b) plan. For
more research, analysis and insights from The 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 more than
six million employees to solve real problems, create positive change,
and expand on the success of the employer-sponsored retirement system.
With more than 1,000 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 the Principal Financial Group
The Principal Financial
Group® (The Principal®)1 is a global
investment management leader offering retirement services, insurance
solutions and asset management. The Principal offers businesses,
individuals and institutional clients a wide range of financial products
and services, including retirement, asset management and insurance
through its diverse family of financial services companies. Founded in
1879 and a member of the FORTUNE 500®, the Principal
Financial Group has $516.2 billion in assets under management2 and
serves some 20.6 million customers worldwide from offices in Asia,
Australia, Europe, Latin America and the United States. Principal
Financial Group, Inc. is traded on the New York Stock Exchange under the
ticker symbol PFG. For more information, visit www.principal.com.

Plan Sponsor Council of America is not an affiliate of any company of
the Principal Financial Group.

1 “The Principal Financial Group” and “The Principal” are
registered service marks of Principal Financial Services, Inc., a member
of the Principal Financial Group.
2 As of Sept. 30, 2015.


Principal Financial Group
Jaime Naig, 515-247-0798
Sponsor Council of America
Hattie Greenan, 540-323-7828