Higher education institutions are embracing 401(k) plans to the point where they are more popular than 403(b) plans, according to a report issued Friday by Transamerica Retirement Solutions.
The percentage of higher education institutions offering 401(k) plans rose to 53% last year from 46% in 2015 and 42% in 2014.
The percentage of institutions offering 403(b) plans dropped to 49% last year from 64% in 2015 and 79% in 2014, said the report based on a survey of 249 institutions.
"The difference between 401(k) and 403(b) plans is becoming less and less," said Brodie Wood, senior vice president of education markets, in an interview. He speculated that as higher education institutions consolidate various plans, they may choose the 401(k) plan based on cost and availability of services.
The dueling trends for 401(k) and 403(b) plans reflect "pressure" on higher education institutions "to offer the same competitive benefits as corporate businesses if they hope to compete for talent," said the report. "It also provides a wider choice of retirement vendors."
Transamerica also detected a big increase in the percentage of plans offering auto features. Last year, 67% of plans offered automatic enrollment vs. 44% in both 2015 and 2014. Also last year, 36% of plans used auto escalation vs. 24% in 2015 and 23% in 2014. The plans' increasing use of consultants is driving this greater interest in auto features, Mr. Wood said.
The survey also found that more higher education institutions' plans are offering loans and hardship withdrawals. For loans, the percentage was 71% last year vs. 30% in 2015 and 22% in 2014. For hardship withdrawals, 74% offered them last year vs. 33% in 2015 and in 2014.
The increase in loan availability is due primarily to the growing number of 401(k) plans "where loans are more feasible, along with the gradual phasing out of 403(b) plans, where loans are looked at with disfavor," the report said. "The story for hardship withdrawals is similar."
This is the third annual higher education survey by Transamerica. The information was based on phone interviews this summer with clients and non-clients, Mr. Wood said. Fourteen percent of the plans surveyed had more than $250 million in assets.
