Despite pandemic's hit to nonprofit sector, 403(b) participants keep the faith
Focus on retirement plan design.
Employees of nonprofit organizations stepped up their participation in 403(b) retirement plans last year despite the impact of the pandemic.
Nonprofits again proved to be leaders in specific retirement plan design features. More than half of 403(b) plans reported offering annuities as a distribution option that would provide guaranteed income in retirement. Nonprofits are also ahead on offering access to environmental, social and governance-focused investment options.
Overall, workers participated in 403(b) plans at the highest levels since tracking began in 2008, according to a survey from the Plan Sponsor Council of America. Overall retirement plan participation continued to climb, rising to 77 percent in 2020, up from 76.6 percent in 2019 and 72 percent in 2018.
The research, sponsored by Principal Financial Group, surveyed nearly 400 nonprofit retirement plan sponsors on outcomes during 2020. The increase in plan participation coincided with a continued emphasis by nonprofits on automatic enrollment in 403(b) plans. Nearly 30 percent of organizations said they use the feature, a 50 percent increase from just five years ago.
“Nonprofit workers’ continued commitment to retirement plan participation, even in the face of economic uncertainty, affirms the importance of these programs and the value of the education provided by employers,” said Hattie Greenan, director of research and communications at the council/ “The use of automatic enrollment has been shown to not only increase participation but participant outcomes.”
The survey also showed an overall increase in focus from nonprofit employers on retirement benefits and outcomes:
- 29 percent of plans noted having an automatic enrollment feature, compared to 24 percent in 2019.
- More than half of plans with automatic enrollment now also automatically escalate the default deferral percentage over time.
- Half of 403(b) plans now offer Roth after-tax contributions, up from 47 percent in 2019.
- The availability of investment advice for participants increased to 42 percent in 2020 from 37 percent the previous year.
- More plan sponsors are monitoring investment results more frequently, with 40 percent noting quarterly monitoring vs. 38.5 percent in 2019.
“The survey results show resilience among organizations and workers that arguably faced the biggest challenges during the pandemic: hospitals, foundations, schools and the arts,” said Kevin Morris, vice president and chief marketing officer, retirement and income solutions, at Principal.
“As we move into the next phase of recovery, it’s as important as ever that nonprofits are supported in providing strong retirement benefits and education to their workforce to continue to help participants feel more financially secure.”
READ MORE: