The majority of not-for-profit organizations are offering target-date funds for their 403(b) plans, according to a new survey, which comes several weeks after federal regulators convened a hearing in Washington, D.C., to explore their recent poor performance.

The survey from the Profit Sharing/401k Council of America (PSCA) also found that nearly a quarter of organizations that don’t offer target-date funds in their 403(b) plans intend to do so in the next year.

The funds mix stocks, bonds and other investments, and shift to more conservative offerings as the investors near their retirement. About $165 billion was held in the funds last year, more than double the $71 billion invested in 2005.

The Securities and Exchange Commission and Department of Labor held a hearing in June to address recent investment losses in the funds. Funds with target dates between 2000 and 2010 lost nearly a quarter of their value (22.5%) last year, while funds with targets of 2011 to 2015 lost 28%, according to Morningstar research.

Three years ago, reforms in pension legislation employers to automatically enroll their workers in 401(k) plans, then invest those contributions in target-date funds.

The first-of-its-kind 403(b) Target-Date Fund Survey, sponsored by the Principal Financial Group, shows that more than half (51%) of the respondents offer target-date funds as investment options in their 403(b) plans. The study also found that the number of 403(b) plans using target-date funds as the default investment option more than doubled since 2007. PSCA has seen a similar trend in 401(k) plans.

David Wray

“Thousands of not-for-profit organizations in the U.S. rely on employee benefits such as 403(b) plans to compete for the best employees,” says David Wray, president of PSCA, in a statement. “This survey shows that 403(b) plans are evolving to more closely resemble 401(k) plans.”

“This new insight into 403(b) plans comes at a critical time,” said Aaron Friedman, national practice leader for non-profits from The Principal. “It provides helpful benchmarking data for non-profit organizations who are scrambling to meet new regulations imposed by the IRS.”

The survey found more than 58% of respondents reported being either satisfied or very satisfied with their target-date funds. Respondents said the funds offered important features, including diverse asset allocations, quality in underlying investment managers, liability risk minimization and cost control.