403(b) Signal
Dashboard
This board provides a data-driven overview tracking key trends in participation rates, contribution amounts, and fee structures within nonprofit retirement plans, offering a clear snapshot of ongoing shifts in the sector.
Participation Velocity
2023-2024
Consolidated data from Form 5500 filings within the education sector, reflecting aggregated retirement plan information across multiple institutions.
Represents the share of eligible employees actively contributing, indicated by having a positive elective deferral balance in their retirement accounts.
This analysis includes only retirement plans with 1,000 or more participants, focusing on larger nonprofit institutions where data is more robust. Smaller nonprofit plans typically exhibit much slower participation growth, largely due to limited resources for implementing automatic enrollment features, which are key drivers of increased engagement in retirement savings programs.
Contribution Distribution Shift
Analysis of Trends: The recent surge in employee deferral rates is largely attributed to the new catch-up contribution provisions introduced by SECURE 2.0, alongside the widespread adoption of automatic annual escalation protocols, typically set at 1%, particularly among private university retirement plans. These factors combined have significantly boosted average contribution levels.
Employer
Matches
We are closely tracking the ongoing shift from traditional fixed non-elective employer contributions toward more performance-based matching structures that incentivize higher employee deferrals, reflecting evolving strategies in plan design to enhance participant engagement.
Match Optimization
Confirmed Trend IdentifiedHistorically, many plans have offered a fixed non-elective employer contribution set at 10% of an employee’s salary, provided regardless of whether the employee elects to contribute to their retirement plan, representing a straightforward but less flexible approach to employer funding.
Current shifts show plans moving toward a hybrid model combining a 5% non-elective base contribution with a dollar-for-dollar matching incentive up to an additional 5% of employee pay, aiming to encourage higher personal contributions while maintaining a guaranteed employer contribution.
Vesting Acceleration
Market Signal ObservedMany plans currently apply a vesting schedule for employer contributions that includes either a 3-year cliff vesting or a 5-year graded vesting period, meaning participants must remain employed for a set time before gaining full ownership of employer credits.
To remain competitive in attracting and retaining talent within the higher education sector, an increasing number of plans are offering immediate 100% vesting of employer contributions, eliminating waiting periods and enhancing the appeal of their retirement benefits.
Fee Dynamics
There is a noticeable shift from traditional percentage-based asset management fees (AUM) toward flat dollar fees charged per participant, typically ranging from $45 to $85 annually. This change simplifies fee transparency and can affect overall plan costs depending on participant account sizes.
Data Source: 2023 NEPC Fee Study, providing detailed analysis of fee trends across retirement plans.
The use of 'ERISA account' credits is increasing, where mutual fund revenue sharing fees are returned directly to participant accounts. This practice enhances fee transparency and can improve net investment returns for plan participants.
Provider Movement
TIAA and Nuveen continue to hold a dominant position in the pure higher education retirement market, with over 70% market share. However, they are encountering growing competition in the medical and clinical sectors, which are becoming more contested.
While TIAA/Nuveen maintain leadership among traditional higher education clients, their foothold is challenged by competitors expanding in adjacent medical and clinical plan segments, indicating a shifting competitive landscape.
Fidelity and Vanguard
These providers are experiencing significant asset inflows as multi-vendor retirement plans increasingly consolidate into single-recordkeeper arrangements, streamlining administration and potentially reducing fees.
Empower Financial
Following its acquisition and integration of Prudential’s retirement business, Empower has aggressively expanded its presence in the 403(b) market, capturing new clients and increasing market share through enhanced service offerings.
Plan Design
Managed Account Default Options
An emerging trend is the adoption of hybrid default investment strategies where participants are initially placed in target-date funds (TDFs) until age 50, after which they are transitioned into managed accounts tailored to individual risk profiles and goals.
Lifetime Income Options
There is growing incorporation of Qualified Default Investment Alternatives (QDIAs) that include guaranteed income features, such as annuities, integrated within target-date fund frameworks to provide participants with income stability in retirement.
University vs. Nonprofit Sector
Pulse Check
Data Reliability Note
Data from the university sector is considered highly reliable, owing to stringent audit standards applied to large retirement plans, as reported through Form 5500 and Schedule C filings. In contrast, data representing the broader nonprofit sector—such as smaller social service organizations and arts groups—is more variable. This nonprofit data is derived from a representative sample of approximately 400 plans rather than a comprehensive census, which may affect its consistency and precision.