Data and Research

403(b)s More Likely to Offer In-Plan Income Products

The 2016 PLANSPONSOR DC survey also found 403(b) plans are also more likely than other DC plans to offer systematic distribution options in their plans.

By Rebecca Moore editors@strategic-i.com | January 11, 2017

While 401(k) plan sponsors are hesitant about adding in-plan retirement income solutions, 403(b) plans have been using them all along. 

According to the 2016 PLANSPONSOR Defined Contribution (DC) survey, 27.2% of 403(b) plans offer in-plan income products that guarantee monthly income, compared to 7.3% of DC plans overall. More than 12% offer in-plan income products that guarantee a base benefit, compared to DC plans overall. Eleven percent offer in-plan income NOT offering guarantees, and 5.2% offer an out-of-plan annuity purchase/ bidding service, versus 5.7% and 2.6% of DC plans, respectively.

Some of the numbers are even greater for 403(b) plans governed by the Employee Retirement Income Security Act (ERISA). Among those plans, 32.6% offer in-plan income products that guarantee monthly income, and 12.7% offer in-plan income products that guarantee a base benefit.

Among plans not governed by ERISA (non-ERISA 403(b)s), 29.9% offer in-plan income products that guarantee monthly income, and 18.6% offer in-plan income products that guarantee a base benefit. Nearly 23% offer in-plan income NOT offering guarantees, and 6.2% offer an out-of-plan annuity purchase/ bidding service.

The survey found 403(b) plans are also more likely than other DC plans to offer systematic distribution options in their plans (70.7% of 403(b)s vs. 49.8% of all DC plans). Nearly 72% of ERISA 403(b)s do so, and 70.3% of non-ERISA 403(b)s do so.

The 2016 PLANSPONSOR DC Survey received responses from 481 403(b) plans, including 112 non-ERISA plans.