A new LIMRA report on 403(b) plans studied the two largest market segments — healthcare and higher education — and may provide clues to plan providers on how to serve the broader 403(b) market.
The research revealed these key findings and recommendations:
- Understand the Language of Paternalism: Most of the plan sponsors in the survey (86 percent) said the primary objective of their plan is to help employees save enough to retire. Conversations with healthcare and higher education prospects should reflect their concern for participant savings as well as plan features and services that could result in better outcomes for their employees.
- Show How You Can Increase Participant Saving and Outcomes: Only a third of organizations believe they have met the challenge of motivating employees to save enough. LIMRA’s study found that plan sponsors believe only 40 percent of their participants will be well prepared for retirement. This environment provides an opportunity for plan providers to demonstrate the effectiveness of their education programs to boost savings. In addition, plan providers can assist with tools that plan for and illustrate retirement income, creating a compelling story for both plan sponsors and participants.
- Educate Plan Sponsors on their Fiduciary Responsibility: A little more than a quarter of plan sponsors do not believe they have completely met the challenges of managing their fiduciary responsibility. It’s also likely that a number of those who believe they have, may in fact not have, fully understood their fiduciary responsibility. The more certainty a company can bring to a plan sponsor about their roles and responsibilities, the more comfortable, and satisfied, a plan sponsor will be.
- Educate Plan Sponsors on Retirement Income Options: Two in five plan sponsors feel it is very important to offer a guaranteed retirement income option to participants in retirement as an alternative to a lump sum payment. LIMRA expects as the offerings in this area increase, acceptance of these offerings will rise and will be worth discussing with plan sponsors.
- Be Aware of Potential Assets Growth in Shift to DC Plans: Thirty-five percent of surveyed 403(b) plans in these markets currently offer a defined benefit (DB) plan. If these organizations freeze or terminate those plans, they would likely want to start offering an employer match in their defined contribution (DC) plans. New matching contributions could increase the overall 403(b) assets levels of plans as well as the flows to the plan providers serving them.
Members can learn more about the results of this study by visiting: Exploring 403(b) Plan Practices and Trends: Healthcare and Higher Education (2013).
For more information, non-members may contact LIMRA PR.