Unlocking the Future of Retirement Plans in Higher Education: Examining Pooled Plan Arrangements in Higher Education

November 20th, 2023

Higher education institutions are no strangers to challenges, especially when helping faculty and staff prepare for retirement. According to Transamerica's 2023 higher education survey, pooled retirement plan solutions may be an option to consider as these institutions tackle retirement challenges.

What Are Pooled Plan Solutions?

A pooled plan solution allows employers the potential to enjoy benefits available to the largest plans by joining other employers in adopting a pooled plan solution, simplifying administrative tasks, mitigating fiduciary liability, and potentially reducing costs. The objective? To provide access to high-quality retirement plans, regardless of an institution's size.

The Current Landscape

Higher education institutions often have a complex set of retirement plans to meet the needs of various groups of faculty and staff, including 403(b) plans — which are widely offered in this sector. The most well-known pooled plan solutions have only been available for 403(b) plans on par with 401(k) plans since SECURE 2.0 was enacted in 2022. Yet 15% of respondents indicated interest in exploring pooled plan solutions in the future.

Why Consider a Pooled Plan Solution?

Our higher education survey revealed why institutions may opt for pooled plan solutions:

Cost-Effectiveness: Nearly half (47%) cited lowering costs as a primary reason.
Administrative Ease: Another 47% appreciated the administrative assistance these plans offer.
Shared Fiduciary Liability: 41% of respondents saw mitigating fiduciary liability as a key benefit.

The Role of Advisors and Consultants

One of the most illuminating findings was the universal use of financial advisors or consultants by institutions that adopt a pooled plan solution. These professionals often act as 3(21) investment advisors or 3(38) investment managers, helping to share the fiduciary obligations and mitigate the fiduciary liability for the adopter.

Time to Explore Your Options?

A small but notable percentage of the institutions overall are considering the shift to a pooled plan solution, and 19% of faith-based organizations are also exploring this option. If you are part of a higher education institution, it may be time to consult with an expert about whether a pooled retirement plan solution could be the right fit for your institution.

More Insights to Come

Our 2023 higher education survey shows that while pooled retirement plan solutions are not yet the norm in higher education, they offer compelling advantages that deserve thoughtful consideration. With more institutions exploring this option, pooled plan solutions may have a role.

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Before adopting any plan, sponsors should carefully consider all of the benefits, risks, and costs associated with a plan. Information regarding retirement plans is general and is not intended as legal or tax advice. Retirement plans are complex, and the federal and state laws or regulations on which they are based vary for each type of plan and are subject to change. In addition, some products, investment vehicles, and services may not be available or appropriate in all workplace retirement plans. Plan sponsors and plan administrators may wish to seek the advice of legal counsel or a tax professional to address their specific situations.