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CCH® PENSION — 06/29/12

PSCA survey reports increase in use of target date funds, Roth option by 403(b) plans

The latest 403(b) plan sponsor survey from the Plan Sponsor Council of America (PSCA) found a greater use of target date funds and a significant increase in the adoption of a Roth feature. The survey, which was sponsored by the Principal Financial Group®, shows more stability and less uncertainty among 403(b) plan sponsors.

"The engagement of 403(b) plan sponsors is much higher than in years past. They're adjusting to the new regulatory environment, and show a much better understanding of ERISA," said David Wray, president of the PSCA. "In many ways, sponsors of 403(b) plans are catching up to the 401(k) system."

The 403(b) plan sponsor survey, reflecting 2011 data, shows a continuation of the trend toward greater use of target date funds. The survey found that nearly three fourths (72.5%) of plan sponsors offer target date funds as an investment option, an increase from 69.1% in 2010. The survey also revealed a significant increase in the adoption of a Roth feature. The number of 403(b) plans permitting Roth after-tax contributions has doubled in the past four years. In 2011, 21.7% of 403(b) plans allowed Roth contributions, up from 16.9% in 2010 and 10.9% in 2007.

Among the other findings:

• The percentage of plan sponsors who don't know their ERISA status is down from 10% in 2010 to 6.8% in 2011.
• Twenty percent fewer sponsors are uncertain over whether they have an investment policy statement.
• The use of email communication has increased (at 65% in 2011 vs. 59.5% in 2010), as has use of seminars/workshops (53% in 2011 vs. 41.8% in 2010). These increases likely reflect participant preferences and cost-efficiency trends, the PSCA said.
• Nearly 40% of plan sponsors made changes to the investment lineup in the last year and nearly 26% plan a comprehensive re-design in the next 12 months.

Source: PSCA press release, May 22, 2012.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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