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Despite Pandemic, Nonprofit Workers Boost Participation in 403(b) Employer Retirement Plans

Automatic enrollment likely key to more workers contributing to their retirement plans than ever before

Despite COVID-19 hitting nonprofit organizations particularly hard last year, nonprofit workers participated in 403(b) retirement plans at the highest level since tracking began in 2008, according to an annual 403(b) Plan Survey from the Plan Sponsor Council of America (PSCA). Overall retirement plan participation continued to climb, rising to 77.2% in 2020, up from 76.6% in 2019 and 72% in 2018.

The survey, sponsored by Principal Financial Group®, surveyed nearly 400 nonprofit retirement plan sponsors on outcomes during 2020. The increase in plan participation coincided with a continued emphasis by nonprofits on automatic enrollment in 403(b) plans. Nearly 30 percent of organizations said they use the feature, a 50% increase from just five years ago.

“Nonprofit workers’ continued commitment to retirement plan participation, even in the face of economic uncertainty, affirms the importance of these programs, and the value of the education provided by employers,” said Hattie Greenan, director of research and communications at PSCA. “The use of automatic enrollment has been shown to not only increase participation, but participant outcomes.”

The survey also showed an overall increase in focus from nonprofit employers on retirement benefits and outcomes.

  • 28.7% of plans noted having an automatic enrollment feature (including 42.9% of large organizations), compared to 24.4% in 2019.
  • More than half (56.3 percent) of plans with automatic enrollment now also automatically escalate the default deferral percentage over time.
  • Half (49.5%) of 403(b) plans now offer Roth after-tax contributions, up from 46.8% in 2019.
  • The availability of investment advice for participants increased to 41.6% in 2020 from 36.7% the year prior.
  • More plan sponsors are monitoring investment results on a more frequent basis, with 40.3% noting quarterly monitoring versus 38.5% in 2019.

“The survey results show resilience among organizations and workers that arguably faced the biggest challenges during the pandemic: hospitals, foundations, schools, and the arts,” said Kevin Morris, vice president and chief marketing officer, Retirement and Income Solutions at Principal®. “As we move into the next phase of recovery, it’s as important as ever that nonprofits are supported in providing strong retirement benefits and education to their workforce to continue to help participants feel more financially secure.”

Challenges of the pandemic

Amidst the good news, the challenges of the pandemic remained in some areas.

Some nonprofits (12.5 percent) in the hardest hit sectors reduced or suspended plan contributions, reducing the overall average from 6.3% of pay in 2019 to 4.6% in 2020. Likewise, workers’ saving rates slipped to an average of 6.2%, down from a peak of 7.2% in 2019. The increase in adoption of automatic enrollment may have contributed to this decline, given the default deferral rate is 3% or less in the majority of plans (63.6%).

While there were increases in plan loans (13.6% in 2020 versus 11.8% in 2019) and hardship requests (1.3% from 0.8% the year prior), the increases were modest in view of the pandemic’s impact and the expanded access afforded by the CARES Act.

“There is no doubt that the nonprofit sector has been disproportionally impacted by the economic strains of the pandemic, particularly in certain fields, and some had to make the financial decision to cut back on plan contributions and savings,” said Greenan of the PSCA. “The good news is that this was still a small percentage of all organizations, and even for those, many are already reinstating, or making plans to reinstate, their contributions.”

Leading on Guaranteed Retirement Income, ESG

Nonprofits proved again to be leaders in specific retirement plan design features. More than half (53.5%) of 403(b) plans reported offering annuities as a distribution option that would provide guaranteed income in retirement. That’s well above 401(k) plans, with only 17.2% providing that option.

Nonprofits are also ahead on offering access to environmental, social, and governance (ESG)-focused investment options. Among asset classes available to participants, 37.7% of those surveyed offer ESG. That compares to an average of just 2.6% in 401(k) plans.

PSCA’s 2021 403(b) Plan Survey of nearly 400 non-profit organizations across the U.S. is the only independent 403(b) research report that delivers actionable data on trends among plan sponsors in the nonprofit sector. For more survey results, visit:

About the Plan Sponsor Council of America

The Plan Sponsor Council of America (PSCA), part of The American Retirement Association, is a diverse, collaborative community of employee benefit plan sponsors, working together on behalf of millions of employees to solve real problems, create positive change, and expand on the success of the employer-sponsored retirement system. With members representing employers of all sizes, we offer a forum for comprehensive dialogue. By sharing our collective knowledge and experience as plan sponsors, PSCA also serves as a resource to policymakers, the media and other stakeholders as part of our commitment to improving retirement security for millions of Americans.

About Principal Financial Group®

Principal Financial Group® (Nasdaq: PFG) is a global financial company with 18,000 employees[1] passionate about improving the wealth and well-being of people and businesses. In business for more than 140 years, we’re helping more than 45.5 million customers[2] plan, insure, invest, and retire, while working to support the communities where we do business, improve our planet, and build a diverse, inclusive workforce. Principal® is proud to be recognized as one of the World’s Most Ethical Companies[3], a member of the Bloomberg Gender Equality Index, and a Top 10 “Best Places to Work in Money Management[4].” Learn more about Principal and our commitment to sustainability, inclusion, and purpose at


As of June 30, 2021.


As of June 30, 2021.


Ethisphere Institute, 2021.


Pensions & Investments, 2020.



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