Data and Research December 7, 2018

403(b) Core Menus Offer Variety of Investments

On average, they offer 27 core investment options, according to ICI and BrightScope

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The average large 403(b) plan subject to the Employee Retirement Income Security Act (ERISA) offered 27 core investment options in 2015, according to a new report from the Investment Company Institute (ICI) and BrightScope.

“The “Brightscope/ICI Defined Contribution Plan Profile: A Close Look at ERISA 403(b) Plans, 2015” suggests that nonprofit employers sponsoring 403(b) plans recognize the importance of plan design and include features that will help attract and retain qualified workers,” says Sarah Holden, senior director of retirement and investor research at ICI. “Plan design features, which drive engagement with retirement savings, include automatic enrollment, employer contributions, active and indexed investment options, and the flexibility of a loan feature. With these multiple features, employers are able to customize the design of their 403(b) plans to suit their workforces.”

The study found that in 2015, nearly all large 403(b) plans covered by ERISA included domestic equity funds, international equity funds and domestic bond funds in their offerings. Nearly nine in 10 offered fixed annuities, and more than eight in 10 offered target-date funds (TDFs). Other core investment options included balanced funds, international bond funds and money funds. Ninety-seven percent offered index funds, and 81% offered TDFs.

Eighty-one percent included employer contributions, up from 74% in 2009. “Employer contributions have grown over time and constitute an important share of total ERISA 403(b) plan contributions, totaling $8 billion, or 29% of all contributions,” says Brooks Herman, head of data and research at BrightScope. “Often designed as matching contributions, these employer contributions promote retirement saving among employees and encourage them to build a nest egg for the future.”

ICI and BrightScope also identified that total ERISA 403(b) plan costs in 2015 averaged 71 basis points, down from 82 basis points in 2009.

Fifty-four percent of plan assets were invested in mutual funds, 34% in variable annuities and 22% in fixed annuities.

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Benefits December 7, 2018

Wellness Programs That Combine Health and Finance Seen as Essential

Findings in a Buck survey demonstrate that a failure to creatively invest in employee wellness can result in many adverse consequences for the success and sustainability of a business.

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When workers are both financially and physically fit, human resource (HR) executives believe this can boost workplace productivity, job satisfaction and employee retention, benefits consulting firm Buck learned in a survey.

The survey also found that 84% of HR executives believe that when employees are not financially fit, this could deteriorate into financial instability, and 83% think it could lead to financial distress. Fifty-two percent think it could lead to lower productivity. Forty-seven percent think it could result in higher health care costs, and 30% think it could result in higher turnover.

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The HR executives said that the most mature offering their companies have been presenting to workers is help with physical wellness. However, in the last five years, many have added financial education, specifically on money management and budgeting (66%), financial health assessments (66%), retirement calculators (63%) and financial literacy education (59%).

Nearly 75% view holistic financial and physical health support as important employee value propositions, up dramatically from 38% in 2016. Nearly half say they offer these services tailored to different generations. Seventy-three percent are focused on reducing health care or insurance costs, up from 63% in 2016.

“Our survey results confirm that supporting employee wellness holistically is much more than a ‘nice to do’—it’s a core, competitive business need,” says Ruth Hunt, a principal in Buck’s engagement practice. “Our findings demonstrate that a failure to creatively invest in employee wellness can result in many adverse consequences for the success and sustainability of a business.”

Companies are also turning to technology to drive efficiencies in benefits. This includes predictive analysis (84%), incentive tools and tracking (80%), portable hubs (69%) and decision-support tools (63%).

“A combination of stresses such as health challenges, relatively stagnant wages, heightened financial pressures, and always-on technology are taking a personal toll on employees,” Hunt says. “Employers are now focusing on well-being programming accordingly. Well-being has become a popular catchphrase, but the stressors are real and employers can actually see how employees’ well-being is impacting the bottom line.”

Buck’s findings are based on responses from 252 employers in 56 countries covering 5.22 million employees.

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