Retail mutual fundsgained market share in 403(b) plans last year, while the use of once-popular group fixed annuities fell sharply, a survey by Cerulli Associates, Boston, shows. The firm also predicted mutual funds will play an ever-increasing role in these plans.Retail mutual funds were responsible for 26.4% of assets in 2010, up from 21% in 2009, according to the survey of 20 providers accounting for more than 80% of 403(b) assets. Institutional mutual fund assets edged up to 18.4% from 18.1%.
“The 403(b) market is still about three to five years behind the 401(k) market” in embracing institutionally priced mutual funds, said Bing Waldert, a Cerulli director, adding that moving to institutional mutual funds from group fixed annuities is an evolutionary process for sponsors.
“They are still taking baby steps,” he added. “The organizations may not know the pricing power they have. This reflects the relative immaturity of the 403(b) market relative to 401(k)s.”
It is important to remember that a 403(b) plan can be an ERISA regulated plan if the sponsor contributes to the employees accounts.
Please comment or call to discuss how this affects your organization.
- 6 Little-Known 401(k) Perks (money.usnews.com)
- Roth 401(k) and Roth 403(b) Plans (turbotax.intuit.com)