403(b) plan sponsors focus on guaranteed income as they rank top priorities for 2022

Guaranteed income is a top priority for many non-profit organizations with 403(b) retirement plans as they head into 2022, with interest more than doubling since last year.

“Though increasing plan participation and ensuring plan compliance are always top of mind for plan sponsors, we are seeing a shift in other plan priorities as organizations increasingly look to provide tools and support that will increase the long-term financial security of employees,” said Hattie Greenan, director of research and communications for the Plan Sponsor Council of America.

A recent PSCA survey sponsored by Principal Financial Group determined the top 10 403(b) priorities for the coming year:

1. Increasing participation rates, 22.5 percent
2. Plan compliance and reducing fiduciary liability, 21.7 percent
3. Providing retirement income options for participants, 13 percent
4. Providing financial wellness tools, 12.3 percent
5. Increasing deferral rates, 10 percent
6. Enhancing participant education, 8 percent
7. Reducing plan cost, 5 percent
8. Changing the investment lineup, 2.2 percent
9. Conducting an advisor or consultant search, 1.4 percent
10. Conducting a recordkeeper search, 1.4 percent

Six in 10 organizations said their top priority is to maintain their current plans as they are now, which is a challenge for many in the wake of disruptions caused by the response to the COVID-19 pandemic, including financial and staffing concerns. This was followed by the objective of using the plan to retain employees, reflecting the pressure that non-profits face amid the current labor shortage.

A powerful tool in that retention strategy is the employer matching contribution. According to the survey, the pandemic has not greatly affected employer contributions to 403(b) plans. Most organizations (89 percent) have not made any changes to employer contributions, and only 1.4 percent of plans indicated that contributions are still suspended with no plans to restore them.

Since last year, nearly a quarter of plan sponsors noted an increase in online education, and 18 percent indicated an increase in webinars. These boosts in virtual options seem poised for further innovation and growth. About 46 percent of plan sponsors say they will engage a financial professional to support their employee education efforts in 2022.

The impact of managing employee education differed depending on the size of the organization. Large organizations were much more likely to have adjusted education methods (72.7 percent) than smaller organizations (10.4 percent).