Plan Sponsors Making Significant Governance Changes to Improve 403(b) Plan Performance, Points to Continued Areas of Focus

Plan sponsors are changing key governance practices to improve 403(b) plan performance and outcomes for employees, according to new findings from the latest Plan Sponsor Council of America (PSCA) survey report. Sponsored by Principal Financial Group, the report highlights that changes are largely in response to litigation surrounding plans, the need to mitigate risk, recommendations from their advisor, and the normal course of plan governance.

The PSCA 403(b) snapshot survey is the only research report of its kind that assesses plan sponsors awareness of fiduciary responsibilities and delivers actionable insights to help 403(b) plan sponsors.

The retirement security of millions of workers in the non-profit sector depends on effective plan designs and prudent oversight by plan sponsors, notes Hattie Greenan, Director of Research and Communications at PSCA. The data not only confirms that 403(b) plan sponsors take that responsibility seriously but should also continue to look for additional ways to better provide that oversight and support.

Highlights from the PSCA Fiduciary Awareness in 403(b) Survey The PSCA survey, which includes responses from 300 403(b) plan sponsors representing a diverse group of non-profit organizations, identified general change trends across all plan sizes.

  • Plan Governance Changes: Nearly twenty percent of plans made governance changes. Of those that did:
    • Nearly half re-evaluated their plans governance structure.
    • More than half of plan sponsors hired a fiduciary advisor or shifted to a fiduciary advisor relationship.
    • Nearly 20 percent reviewed or modified their fiduciary insurance.
    • Forty percent created an investment policy statement.
  • Investment Changes: Half of the plans surveyed made changes to investment options, including 72 percent of large plans (more than 1,000 participants). Of those that made investment changes:
    • More than 80 percent removed or replaced underperforming investments.
    • Half of large plans changed from retail to institutional share classes.
    • Nearly twenty percent reduced the number of investment options.
    • One-fourth of small plans adopted a Qualified Default Investment Option (QDIA).
  • Plan Fee Changes: One-fourth of plans made changes to fees, including half of large plans.
    • Of those, nearly half implemented fee levelization, and thirty percent began benchmarking fees.
  • Reasons for changes:
    • Normal course of the plans governance (53.6 percent)
    • Advisor recommendations (48.8 percent)
    • In response to litigation surrounding plans today (17.5 percent)

Were pleased to see the amount of attention 403(b) plan sponsors are giving to plan governance, said Aaron Friedman, non-profit national practice leader, Principal. There are still areas that need further attention. For example, 37.8 percent of 403(b) plan sponsors believe their provider acts as a fiduciary. Advisors need to continue to work with plan sponsors to ensure they understand their governance policies and the roles played by all parties.


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Plan sponsors play an important role in the integrity and viability of 403(b) programs, and one that participants often take for granted, noted Greenan. Staying abreast of the latest industry and regulatory developments is an ongoing educational process – one that is and has long been advocated for by the Plan Sponsor Council of America.

About the PSCA 403(b) Plan Sponsor Survey The Plan Sponsor Council of America (PSCA) conducted a survey of 403(b) plan sponsors in October 2018 to assess their awareness of fiduciary responsibilities, and if it has changed in the last two years. The survey also assessed what was driving any change “ the uncertainty regarding a Fiduciary rule, the multiple lawsuits in the news regarding 403(b) plans, or other factors.

Three hundred 403(b) plan sponsors responded to the survey, representing a diverse group or organizations. Two-thirds of respondents are ERISA plans, nearly a quarter are not subject to ERISA, and ten percent of respondents were unsure of their ERISA status. One-third of respondents have fewer 50 participants, and less than 20 percent have more than 1,000. Respondents included a wide range of industries including social and community services organizations, higher education, K-12 Education, and religious institutions. The full report is available at:

About Plan Sponsor Council of America The Plan Sponsor Council of America (PSCA), part of the American Retirement Association (ARA), is a diverse, collaborative community of employee benefit plan sponsors, working together on behalf of millions of employees to solve real problems, create positive change and expand on the success of Americas voluntary, employer-sponsored retirement system. With members representing employers of all sizes, PSCA offers a forum for comprehensive dialogue. By sharing our collective knowledge and experience as plan sponsors, PSCA also serves as a resource to policymakers, the media and other stakeholders as part of its commitment to improving retirement security for millions of Americans. For more information, visit

About Principal Principal helps people and companies around the world build, protect and advance their financial well-being through retirement, insurance and asset management solutions that fit their lives. Our employees are passionate about helping clients of all income and portfolio sizes achieve their goals “ offering innovative ideas, investment expertise and real-life solutions to make financial progress possible. To find out more, visit us at

Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.

Insurance products and plan administrative services provided through Principal Life Insurance Co., a member of the Principal Financial Group, Des Moines, IA 50392.

2018 Principal Financial Services, Inc.

Lonnetta R. Ragland, [email protected]

Hattie Greenan, [email protected]