Despite the coronavirus pandemic’s impact on the U.S. not-for-profit sector in 2020, employees participated in 403(b) retirement plans at the highest level since tracking began in 2008, according to a new survey by the Plan Sponsor Council of America.
The survey, which polled roughly 400 not-for-profit retirement plan sponsors, found overall retirement plan participation rose to 77.2 per cent in 2020, up from 76.6 per cent in 2019 and 72 per cent in 2018. This coincided with a continued emphasis by not-for-profits on automatic enrolment in 403(b) plans, a feature used by roughly 29 per cent of respondents, compared to 24 per cent in 2019. More than half (56 per cent) of plans with auto-enrolment also automatically escalate the default deferral percentage over time.
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The availability of investment advice for participants increased to about 42 per cent in 2020 from 37 per cent in 2019, while 40 per cent of respondents said they’re monitoring investment results on a more frequent basis, compared to 39 per cent in 2019.
However, 13 per cent of the hardest-hit respondents reduced or suspended plan contributions, reducing the overall average from about six per cent of pay in 2019 to about five per cent in 2020. In addition, workers’ saving rates slipped to an average of six per cent, down from a peak of seven per cent in 2019. The survey noted the increase in adoption of auto-enrolment may have contributed to this decline, given the default deferral rate is three per cent or less in the majority (64 per cent) of plans.
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While there were increases in plan loans — about 14 per cent in 2020 versus 12 per cent in 2019 — and hardship requests (1.3 per cent versus 0.8 per cent the year prior), the increases were modest in view of the pandemic’s impact and the expanded access afforded by the U.S. Coronavirus Aid, Relief and Economic Security Act.
More than half (54 per cent) of 403(b) plans said they offer annuities as a distribution option, while 38 per cent offered investment options focused on environmental, social and governance factors, compared to 17 per cent and about three per cent, respectively, of 401(k) plans.