Retirement plan participation is far from uniform in the Tar Heel State, especially when it comes to 403(b) plans, according to the National Bureau of Economic Research (NBER).
A new NBER study, “Supplemental Plan Offerings and Retirement Saving Choices: An Analysis of North Carolina School Districts,” examines the impact of inter-district differences in supplemental retirement plan administration on participation in 403(b) plans, North Carolina’s state-managed 401(k) plan, the state-managed North Carolina 457 plan and a district-managed 457 plan. The study is based on payroll and survey data from 90 public school districts — more than half of all the public school districts in North Carolina.
All North Carolina school districts offer 403(b)s and the state 401(k) plan, but they vary regarding whether they offer the state-managed North Carolina 457 plan and/or a district-managed 457 plan. All school districts in the sample the NBER studied offer at least two plans: a 403(b) plan and the state 401(k) plan.
The vast majority of districts studied give employees a choice of plans. More than 80% allow employees to select from at least three different retirement saving plans. They have between one and 13 403(b) vendors; 43% have between three and five. Employers can limit the number of vendors through a competitive bidding process, but the NBER says that very few school districts have done so.
The NBER found wide variation in total retirement plan participation rates and in 403(b) plan participation rates in particular, even among this population of public-sector workers with the same defined benefit pension plan, health plan and retiree health coverage. Key findings include:
The researchers did arrive at some counterintuitive findings. For example, they found that moderate website quality is associated with higher participation rates, but high website quality (for instance, a website that provides information on investment options) is associated with lower 403(b) participation rates. And in districts with highly selective 403(b) vendor restrictions, participation rates in all supplemental plans are higher.
The report says that the variability it found in participation rates may be attributable to unobserved population characteristics or the effects of peers or school leadership. But it makes the candid admission that even with detailed control variables for district plan management and oversight activities, much of the variation across districts in participation rates is left unexplained.
A new NBER study, “Supplemental Plan Offerings and Retirement Saving Choices: An Analysis of North Carolina School Districts,” examines the impact of inter-district differences in supplemental retirement plan administration on participation in 403(b) plans, North Carolina’s state-managed 401(k) plan, the state-managed North Carolina 457 plan and a district-managed 457 plan. The study is based on payroll and survey data from 90 public school districts — more than half of all the public school districts in North Carolina.
All North Carolina school districts offer 403(b)s and the state 401(k) plan, but they vary regarding whether they offer the state-managed North Carolina 457 plan and/or a district-managed 457 plan. All school districts in the sample the NBER studied offer at least two plans: a 403(b) plan and the state 401(k) plan.
The vast majority of districts studied give employees a choice of plans. More than 80% allow employees to select from at least three different retirement saving plans. They have between one and 13 403(b) vendors; 43% have between three and five. Employers can limit the number of vendors through a competitive bidding process, but the NBER says that very few school districts have done so.
The NBER found wide variation in total retirement plan participation rates and in 403(b) plan participation rates in particular, even among this population of public-sector workers with the same defined benefit pension plan, health plan and retiree health coverage. Key findings include:
- Participation varies significantly across the districts.
- Having more vendors in the 403(b) plan is associated with higher participation rates.
- Plans with many vendors may draw more people in through providing greater choice, more tailored products and greater marketing efforts. However, this process could also result in lower-quality product offerings, potential information overload and less transparent fees.
- Women and non-Hispanic black workers have higher probabilities of contributing to a retirement saving plan and to a 403(b) plan.
- Among participants, non-married individuals are more likely to choose 403(b) plans than are married individuals.
- District-managed 457 plans appear to be substitutes for 403(b) plans among participants.
The researchers did arrive at some counterintuitive findings. For example, they found that moderate website quality is associated with higher participation rates, but high website quality (for instance, a website that provides information on investment options) is associated with lower 403(b) participation rates. And in districts with highly selective 403(b) vendor restrictions, participation rates in all supplemental plans are higher.
The report says that the variability it found in participation rates may be attributable to unobserved population characteristics or the effects of peers or school leadership. But it makes the candid admission that even with detailed control variables for district plan management and oversight activities, much of the variation across districts in participation rates is left unexplained.
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