When teachers and school districts have fewer 403(b) plan provider choices, contribution levels and participation rates suffer, according to new research from the Pension Education and Research Foundation.
PERF’s white paper “Protecting Participation: The Impact of Reduced Choice on Participation by School District Employees in 403(b) Plans,” looks at the impact caused by fewer investment providers for this market.
The foundation is part of the American Society of Pension Professionals & Actuaries.
New data from school districts in Southern California, Colorado and Pennsylvania found that when school districts went from multiple to single 403(b) plan providers, participation decreased more than 50%.
“School districts need to be extremely careful before they cut back on their investment advisers,“ Debra A. Davis, assistant general counsel and director of government affairs for ASPPA and one of three co-authors, said in an interview. “They need to think about why they’re making that decision, and realize there may be alternatives,” such as using a third-party administrator to reduce fees and complexities, and more disclosure of fees and expenses.
Judy Miller, ASPPA chief of actuarial issues and director of retirement policy, said the research is timely, as school districts and legislatures seek ways to reduce costs by curtailing 403(b) plan providers even further. “This research shows that school districts should consider other approaches,” Ms. Miller said in a statement.
ASPPA has a new website designed to educate teachers on this issue, www.savemy403b.org.