Data & Research September 28, 2018

403(b)s Adopting Best Practices

Their use of an adviser acting as a plan fiduciary has increased by 40% in the past four years, according to the Plan Sponsor Council of America.

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Organizations that sponsor 403(b) plans are adopting automatic features to improve plan design and participant outcomes, according to the 2018 403(b) Survey from the Plan Sponsor Council of America (PSCA), sponsored by Principal Financial Group.

The plans’ use of an adviser acting as a fiduciary has increased 40% in the past four years, according to PSCA. Today, 23.9% of 403(b) plans automatically enroll participants into the plan, an increase of 45% since 2008. More than one-third default participants into a deferral rate higher than 3%.

Among the plans automatically enrolling participants, 56.6% combine that with auto escalation, up from 43% in 2015.

Nearly 60% of 403(b) plans have investment policy statements, up from 46% in 2008. Sponsors of 403(b) plans are also streamlining their investment lineups, with these plans offering an average of 25 investments, down from 31 in 2015.

Today, 37.9% of 403(b) plans offer a Roth option, up from 13.9% in 2010.

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“Throughout the past decade, PSCA research has revealed the significant contributions 403(b) plan sponsors have made to their workers,” says Hattie Greenan, director of research and communications at PSCA. “More importantly, they continue to do so by embracing plan design features like automatic enrollment and offering services like one-on-one counseling to help workers make better decisions.”
The Markets September 28, 2018

Millennials Save More in ETFs and Cash

A Charles Schwab SDBA report says the group allocated to ETFs and saved cash at a higher rate than other generations.

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Despite having the lowest participating percentage (11%) for self-directed brokerage accounts (SDBAs), a Charles Schwab report found Millennials allocated more (23%) to their exchange-traded funds (ETFs) than any other age group for the second quarter of 2018.

According to the Charles Schwab SDBA Indicators Report, 19% of Generation X and 16% of Baby Boomers added more to their ETFs. Additionally, 16% of Millennials saved more cash than 13% of Gen Xers and Baby Boomers, respectively.

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Millennials didn’t reign in every category, however. The Charles Schwab report discovered Baby Boomers hold 3% of their portfolios in fixed income, with Gen Xers coming in second (1%) and Millennials at 0.5%. Baby Boomers allocated an average of 39% of their portfolios to mutual funds (which defended their title as the largest holding in all accounts) followed by Gen Xers (36%) and Millennials (32%). Equities came in as runner-up in leading holdings, as 30% of Gen X portfolios were allocated to them, 29% of Baby Boomers and 27% Millennials.

Top equity holdings ranging across all generations included Apple, Inc.; Amazon.com, Inc.; Facebook, Inc.; Berkshire Hathaway, Inc.; and Netflix, Inc.; among others. Concerning ETFs, U.S. Broad Funds were widely used, as the report found the Schwab U.S. Broad Market ETF; SPDR S&P 500 ETF; and Vanguard Total Stock Fund; average in the top five ETF holdings.

Additional findings included popularity in mobile trading, with Millennials and Gen Xers more likely to utilize the platform (19% each) than Baby Boomers (14%), and top balances, which went to Baby Boomers at an average of $365,561, then Gen X at $194,534, and Millennials at $61,916.

For the second quarter of 2018, average SDBA balances within all age groups was $265,902, a 1.5% increase from the last quarter, and a large 23% from 2017’s second quarter.

More information about the report can be found here.

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