Target date funds increasingly featured in 403(b) plans, survey says

Non-profit organizations are embracing target date funds and a majority of 403(b) plan sponsors have begun offering these funds in their plans, a study released today showed. The study, from the Chicago-based Profit Sharing/401k Council of America, found that 51% of 403(b) plan sponsors surveyed offered target date funds and nearly a quarter of organizations that did not offer them plan to do so within the year. The study, sponsored by The Principal Group of Des Moines, Iowa, also found the number of 403(b) plans using target date funds as a default investment option had more than doubled since 2007. A 403(b) plan is a retirement plan that K-12 schools, universities, religious organizations and other non-profit entities employ. “This survey shows that 403(b) plans are evolving to more closely resemble 401(k) plans,” David Wray, president of the PSCA, said in a statement. The survey, conducted in May, surveyed 144 plan sponsors. This date will be helpful as 403(b) plans face new regulations imposed by the Internal Revenue Service, Aaron Friedman, national practice leader for non-profit at The Principal, said in a statement. These new regulations require plan sponsors to have detailed plan documents in place by Dec. 31.