Data and Research December 21, 2023

403(b) Plans Reach Record Participation Rates in 2022

While participation in 401(k) plans dropped in 2022, 403(b) plans saw increased participation rates, according to the Plan Sponsor Council of America’s recent survey.

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Participation rates in 403(b) plans hit an all-time high in 2022, according to the Plan Sponsor Council of America’s 2023 403(b) Survey. 

The survey, sponsored by Hub International and Principal Financial Group, gathered information from 250 nonprofit organizations that sponsor 403(b) plans for employees and revealed 80% of eligible employees contributed to their plans in 2022, up slightly from the year prior.  

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The majority of the plans surveyed (72.2%) are governed by ERISA, 19.8% are non-ERISA plans and the remainder responded that they do not know their ERISA status. 

The average account balance for active and inactive plan participants was $90,511. 

An average of 83.1% of eligible active employees have a balance in their plan, nearly identical to the year before. Nearly one-third of total plan balances belong to terminated vested employees. 

In addition, nearly 20% of eligible participants made catch-up contributions in 2022. Of those organizations that permit catch-up contributions, 42.5% match them. 

Increasing plan participation was a primary goal for 403(b) plan sponsors in 2022, as many said their plan education centered around this mission, as well as increasing financial literacy.  

Nonprofits also contributed an average an average of $6,322 per participant in 2022, rising from $4,887 in 2021according to the PSCA. 

The use of automatic enrollment jumped by nearly 20 percentage points in 2022 and is now used by 31.4% of plans, including nearly half of plans with at least 200 participants. The most common default deferral rate continues to be 3% of pay, as 37.5% of plans use this rate. Two-thirds of plans with automatic enrollment also automatically escalate the default deferral rate over time, up from 57% in 2021 and more than double the percentage that used this feature a decade ago. 

“Seeing it begin to take hold in the nonprofit space, especially as it is largely seen as a best practice in retirement plan administration, bodes well for the increased retirement security for those who dedicate their time to mission-focused organizations, often for less pay than in the corporate world,” said Hattie Greenan, the PSCA’s director of research and communications, in a press release. 

While more 403(b) plans allowed hardship withdrawals in 2022, only 0.6% of participants took a hardship withdrawal in 2022, down from 1.5% in 2022.  

The PSCA also observed a steady increase in plans adopting an investment policy statement over the last few years, with 63.3% of organizations reporting that they have one in 2022, up from 58.8% in 2021. Investments continued to most commonly be monitored on a quarterly basis. 

403(b) plan sponsors also offered more investment options in 2022, as plans provided access to an average of 24 funds for both organization and participant contributions, compared to an average of 23 funds in 2021 More than one-third of plans surveyed offered access to between 26 and 50 funds for participant contributions.  

The majority of plans (74.3%) offered mutual funds, and 42.1% included annuities. The PSCA found that 80% of plans offered target-date funds as an investment option.  

Products December 21, 2023

Investment Product and Service Launches

Morgan Stanley at Work unveils technology enhancements; John Hancock Investment Management launches active international equity ETF; PGIM releases 4 active ETFs.

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Morgan Stanley at Work Unveils Technology Enhancements for End of Year 2023

Morgan Stanley at Work announced technology enhancements to increase automation and efficiency across workplace benefits solutions such as equity compensation, retirement, deferred compensation, executive services, saving and giving, and financial wellness. Morgan Stanley at Work platforms Equity Edge Online and Shareworks together serve roughly 40% of the S&P 500 in the U.S. 

The improvements to Equity Edge Online include a revamped stock plan interface under the unified brand “Morgan Stanley at Work,” simplifying the user experience. Plan administrators can now upload foreign exchange rates by equity type, enabling automated reporting in USD and local currency denominations. Enhanced workflow functionality includes templates and automated scheduling.

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The Shareworks updates offer streamlined plan servicing with improved performance and security controls. A new “Selling Shares” feature allows qualifying U.S. participants to transfer shares directly from their online accounts. Additionally, advanced performance in the Shareworks engine provide greater plan customization.

“Our ongoing mission remains to unify our tools and capabilities into a single user account structure that will enrich the user experience and help both companies and their employees expand how they manage their financial lives,” Mark Mitchell, chief product officer of Morgan Stanley at Work, said in a statement.

John Hancock Launches Active International Equity ETF

John Hancock Investment Management will launch the John Hancock Disciplined Value International Select ETF. The new exchange-traded fund seeks long-term capital growth and is managed by a veteran team at subadviser Boston Partners Global Investors Inc.

The fund focuses on a stock selection process, which targets securities with attractive relative valuations, strong fundamentals and positive business momentum. Portfolio managers Joshua Jones and Christopher Hart have more than 50 years of combined experience and are jointly responsible for the day-to-day management of the fund’s portfolio.

“We are excited to launch a new active international equity ETF with one of our long-term subadvisers who is familiar to our financial professionals and their clients,” Kristie Feinberg, president and CEO of John Hancock Investment Management, said in a statement. “Boston Partners is known for its investment philosophy and ability to find value opportunities that we believe investors will find compelling as a potential core holding in their portfolios.”

John Hancock Investment Management’s ETF suite now totals 13 funds. As of September 30, the firm has more than $5 billion in assets under management.

PGIM Launches 4 Active ETFs

PGIM has launched four actively managed exchange-traded funds:

  • PGIM Jennison International Opportunities ETF;
  • PGIM Jennison Better Future ETF;
  • PGIM Jennison Focused Mid-Cap ETF; and
  • PGIM Short Duration High Yield ETF.

The three new equity ETFs, subadvised by Jennison Associates, seek long-term growth of capital with concentrated, high-conviction portfolios. Jennison’s long-term equity investment approach is based on fundamental research and bottom-up security selection.

The PGIM Short Duration High Yield ETF seeks total return through a combination of current income and capital appreciation, investing in a diversified portfolio of shorter-duration high-yield fixed-income securities that are rated below investment grade.

“Building out our suite of actively managed ETFs is a priority for PGIM, and we have aggressive plans for future product development,” said Stuart Parker, president and CEO of PGIM Investments, in a statement. “We’re thrilled to launch four new ETFs subadvised by our affiliate managers to meet the accelerating demand for active ETFs from our clients.”

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