New 403 (b) survey exhibits most organizations keep on target with retirement plans regardless of COVID-19
DES MOINES, Iowa – (BUSINESS WIRE) – The vast majority (83.6%) of nonprofits with 403 (b) plans are keeping stable and not changing their contribution levels (PSCA) snapshot despite the financial pressures of the COVID-19 pandemic, according to the new plan Sponsor Council of America – Survey sponsored by Principal Financial Group®.
“The survey shows that most nonprofits have maintained their commitment to contributing to retirement, while those in the health and education sectors have been disproportionately affected by the pandemic,” said Hattie Greenan, director of research and communications at PSCA. “These organizations are more likely to consider reducing or suspending plan contributions, and at the same time, workers in these sectors are much more likely to have borrowed and withdrawn from their retirement assets.”
PSCA conducted a snapshot survey of nearly 300 nonprofits in October 2020 to determine what impact the COVID-19 pandemic and resulting economic conditions are having on 403 (b) plans and their participants.
“Through this pandemic, we have seen the adaptability of employers and employees in the nonprofit sector,” said Kevin Morris, vice president and chief marketing officer, Retirement and Income Solutions, Principal®. “We see advisors and finance professionals helping employers make decisions about their retirement plans and ensuring that employees’ savings needs are taken into account.”
Percentage of changes that were made or planned to the employer contributions by the end of the year due to the COVID-19 pandemic
Suspend matching contributions (6.3%)
Suspend mismatched posts (4.1%)
Reduce matching contributions (3.4%)
Reduce mismatched posts (3.4%)
The vast majority of organizations (83.6%) will not change employer contributions to 403 (b) plans this year. However, nearly a third of higher education institutions say they have either reduced contributions to their 403 (b) plans, or will reduce or suspend contributions by year-end. Ten percent of all respondents have suspended or reduced the matching contribution, and 7.5 percent have suspended or reduced the non-matching contribution (some plans have both types of contributions).
Loans and Withdrawals
Percent of nonprofits that have seen an increase in hardship withdrawals by industry since COVID-19
Healthcare and Hospitals (52.2%)
Higher education (including faith-based education) (36.0%)
Research, science or the environment (31.3%)
K-12 education (18.5%)
While three-quarters of plans said they had seen no increase in plan loan activity since the start of COVID-19, only more than a third (36.0%) of hospitals and health organizations saw an increase, as did nearly 30% of higher education institutions. However, these sectors were a relatively small sample of the overall survey.
While more than 70% of organizations reported no change in hardship and discharge volumes this year, more than half (52.2%) of hospital and health systems reported an increase in participants bugging their accounts. More than a third of universities also recorded an increase.
“These results, with most organizations making no changes to their retirement benefits and contribution levels, reflect what we’re seeing at Principal,” said Morris. “Employers continue to see the value in helping workers pay for their future selves.”
The full report can be downloaded from https://www.psca.org/research/403b/2020snapshot.
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Via the Sponsor Council of America plan
The Plan Sponsor Council of America (PSCA), part of the American Retirement Association, is a diverse, collaborative community of pension sponsors who work together on behalf of millions of employees to solve real problems, bring about positive change, and grow the business Success of employer sponsored pension scheme. With 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 for policymakers, the media, and other stakeholders as part of our commitment to improving retirement benefits for millions of Americans.
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